SCOR enables users to address, improve, and communicate supply chain practices. It works within and between all interested parties in an extended enterprise. SCOR is a management tool, spanning from customer to supplier.

The Supply-Chain Operations Reference-model (SCOR) has been developed by the Supply-Chain
Council to describe the business activities associated with all phases of satisfying a customer’s demand. The model itself contains several sections and is organized around the five primary management processes.

PLAN, SOURCE, MAKE, DELIVER, and RETURN.

By describing supply chains using these process building blocks, the Model can be used to describe supply chains that are very simple or very complex using a common set of definitions. As a result, disparate industries can be linked to describe the depth and breadth of virtually any supply chain.

The Model has been able to successfully describe and provide a basis for supply chain improvement for global projects as well as site-specific projects
At the highest level (Level 1) the measurements are stratified into four diagnostic elements:

Reliability
• Delivery performance
• Order fulfilment performance
• Perfect order fulfilment

Flexibility & Responsiveness
• Supply chain response time
• Production flexibility

Cost
• Total Supply Chain Management cost
• Valued-added productivity
• Warranty cost or returns processing cost

Assets
• Cash to cash cycle time
• Inventory days of supply

At the process category level (Level 2) the measurements are stratified into four diagnostic elements for each specific PLAN, SOURCE, MAKE and DELIVER process as shown in below figure.

Defining overall supply chain strategies and goals on the basis of key performance indicators defined in the SCOR model with a Balanced Scorecard can allow companies to easily measure supply chain activities. The SCOR/Balanced Scorecard combination can enable organizations to evaluate supply chain improvement opportunities and set new performance targets.

Business system solutions enable the five steps to supply chain performance results:

1. Establishing measurable supply chain objectives by process
2. Measure current supply chain performance
3. Identify problem supply chain performance areas
4. Develop supply chain initiatives with resources and responsibilities for solving the performance areas
5. Measure supply chain performance on a regular basis, looping back to step three.

The process is typically the responsibility of a specific sales and operations planning team. This includes the company’s decision makers and line managers in marketing, sales, finance, operations, and customer service functions.

The sales and operations planning process enable the company to effectively manage the demand of its customers. It holds the capacity of its operations too. Sales and operations planning generates a uniform and agreed-to set of numbers used to drive the business. It specifically integrates strategic, tactical, and operational planning.

A company’s planning horizon consists of short-, medium-, and long-term periods:

• Strategic company planning – One to five years, reviewed yearly. Sets the company’s strategic direction for future growth. The strategic planning processes set the timing and key strategies for the plan period and strategically allocate resources.

• Tactical planning – Eighteen months, reviewed quarterly. An output of strategic planning. Tactical planning identifies the material requirements and resources to translate medium-term plans into a short-term operational plan and execution.

• Operational planning – Rolling twelve months, reviewed monthly. Translates tactical plans into specific objectives and confirms activities and timings through short-term plans and execution.

Goal of S&OP process

The primary goal of the sales and operations planning process is to facilitate the flow of information between demand and supply planning. Master planning is concerned with coordinating the supply side of the organization. It seeks efficient and economical ways to fulfill market demands by creating purchasing, manufacturing, and distribution plans.

The process of demand planning focuses on generating future forecast estimates based on historical customer sales order patterns. Sales and marketing campaigns further enrich the baseline forecast.

The process itself is fairly simple and comprises the following five essential steps:

1. Create a demand plan.
2. Create a supply plan.
3. Compare the demand and supply plans.
4. Reconcile the demand and supply plans with the financial plan.
5. Update the sales and operations plan.

Below figure shows a typical monthly cycle for sales and operations planning. The demand review is performed first, followed by the supply review with possible supply chain constraints (for example, reduced capacity) before the sales and operations planning meeting is conducted.

The example shows that the sales, marketing, planning, and finance teams reached a demand planning consensus during the first week of the monthly cycle. The second week focuses on supply planners’ efforts to balance the unconstrained demand with the constrained supply planning.

Meetings are held before the official sales and operations planning meeting to resolve any demand and supply imbalances with alternative supply chain options.

Case Study – Manufacturing Company S&OP Process

A consumer goods company markets its electronics products in North America. Since its product offering has less known in the market than its competitors’, the company depends heavily on promotions and direct consumer selling marketing strategy. The company recently received Class A accreditation and provides an example of industry best practice organization.

The company sets an example in the industry by integrating their sales and operations planning with their core business process, building a rich data, and working on an exception-driven decision-making process, which ensures demand and supply plans are proactively balanced.

The figure below shows the participants, format, and result that come out of the weekly and monthly meetings. The collaboration leads to better demand and supply matching with proactive measures to meet market demands.

The sales and operations planning process for the company results in a one-number plan that is then distributed in functional-specific formats of sales, supply, distribution, inventory, and financial plans, as shown in the figure below: