Using SCOR model
in a real Collaborative
Sourcing Scenario
EIPM , Annual conference - Dec 8 2006
Nando Galazzo
2
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Adding value in Procurement:
“Twist suppliers
to the last drop ” ...
Sustained
Value Creation
and Dialogue...
4
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Content
D
The strategic framework
• The players
• The vision
D
Tools & Methodology
• Partnership excellence
• Supply Chain Reference Model (SCOR)
D
The Opportunity
• The Degussa-Borealis business case
Æ
What’s different ?
D
Conclusions
6
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Borealis
Degussa
5 B sales
11.7 B sales
Olefins and Polyolefins( PE/PP)
Specialty Chemicals
EU/Global
Global
Supplier Relationship Management
Solutions to Customer program
Degussa seen as strategic supplier
in 12 supply chains
Borealis seen as key customer
for 5 business units
Value Creation Through Innovation
Responsible-Respect
Exceed-Nimblicity
Research & Innovation are key
elements in our sustainable
development growth strategy
Profile
Products
Reach
Strategic
Fit
Values
Fit
Execution
8
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Competitive advantage
low
low
high
high
Innovation intensity
Strategic framework:
Æ
Sustainable value creation through collaboration
The
Magic
Quadrant
D
Innovate & differentiate
D
Create visibility on
extended SC Opportunities
D
Extract value
Goals & objectives:
Presenting the Approach
Tools and Methodology
Why SCOR
:
If we had mapped processes the classical way
:
SCOR
SCOR
Æ
start small & scale fast
•
Easy mapping
•Quick opportunities identification
•
Commonly used methodology & language
+
=
-
Where is the burning
platform ?
-
Where to start ?
12
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
The Supply Chain Council (SCC) has developed and endorsed th
The Supply Chain Council (SCC) has developed and endorsed th
e
e
Supply Chain Operations Reference
Supply Chain Operations Reference
-
-
model (SCOR)
model (SCOR)
as the cross
as the cross
-
-
industry standard for supply chain management
industry standard for supply chain management
The SCC is an independent, not
The SCC is an independent, not
-
-
for
for
-
-
profit, global corporation with
profit, global corporation with
membership open to all companies and organizations intereste
membership open to all companies and organizations intereste
d in
d in
applying and advancing in state
applying and advancing in state
-
-
of
of
-
-
the
the
-
-
art supply chain
art supply chain
management systems and practices.
management systems and practices.
•
•
Over 1000 Company Members
Over 1000 Company Members
•
•
Cross
Cross
-
-
industry representation
industry representation
•
•
Chapters in Australia/New Zealand, Brazil, Europe, Japan, Nort
Chapters in Australia/New Zealand, Brazil, Europe, Japan, Nort
h
h
America, Southern Africa, and South East Asia with petitions
America, Southern Africa, and South East Asia with petitions
for
for
additional chapters pending.
additional chapters pending.
www.supply
SCOR: A Reference Model for a Supply Chain:
5 core processes:
SOURCE
MAKE
DELIVER
PLAN
RETURN
RETURN
RETURN
Degussa
&
other
Borealis
Suppliers
Degussa
& Other
Borealis
Customer
Common Building Block Approach
Processes
Metrics
Supply chain improvements
Borealis – Degussa
Using SCOR across enterprises
Initial project scope & complexity
•
3 continents, 8 countries
•
23 production sites
•
30 shipping points
•
27 receiving points
•
1600 deliveries/year
•
50,000 Tons shipped
•
7 major supply chains
16
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Common & Simple methodology used
D
Analyze and map common SC
D
Prioritize and select a Pilot
D
Do & Implement Pilot
D
Scale to other areas
Project milestones: Fast & Furious
Analyze
TO BE
Design
Implementation
& Improvement
Implementation
& Improvement
•
Analyze Production,
SC-Structure and Processes
for Borealis and Degussa
supply chains
•
Measure current
performance for
identified product (high
level)
•
Identification of
Measurements of
Improvements
•
Detailed Analysis Level 3
•
Configuration TO-BE
•
Detailed Improvements
TO BE
Validation
Kick Off
•
Implement & Communicate
changes in : Organization,
Processes and Performance
Management Systems
•
SCOR Concept
•
Methodology
•
Project
Approach
•
Define Scope
•
Agree AS IS
•
Select the BU to focus on
with further process
decomposition
•
Present
recommendations
•
Define low level KPI’s
& targets
•
Define tasks &
responsibilities
•
Map changes and define
change process
•
Agree detailed design
•
Train & Coach the
organization
•
Realize & sustain the benefits
0
1
2
3
Mgt. Team Meeting
Feb 7th
Mgt. Team Meeting
September 29th
•
Visioning workshop
•
Develop common set of
KPI’s
18
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Per
o
xi
de
Overview Supply Chain Peroxides
Level 2
Forecasts sent to Malmö & info sent to Pullach
Why not to send straight to Pullach ?
Empty packaging --> opportunity to value
waste ?
Standard LT could be reduced from 15 days to
8 days
SC today --> Degussa US (6 weeks LT)--> Pullach --> Bamble
Why not : Degussa US --> Bamble. Elements to be considered :
Why not relocate product from US to
Pullach plant
LT reduction opp Got --> Sten, in Got. Degussa keeps
sales + Buffer some containers, in Sten, Borealis kepts
some tons of safety stock. Do we really need GOT
storage location ?
Combine shipments to optimize container fill-rate :
use of planning calendar ?
Improved purch. Req. processing (collective by vendor)
Quit COA and promote SQC
ERS or invoicing plan --> potential ?
Realize strategic Vision PP%:
Strategic Vision
OMF growing volume potential for
consolidation transportation, for
Polycom and Polymere
Roadmap to improvements
1. Detailed Level 3 Analysis
2. Discussion Production and
deliver strategy
3. Quantitative analysis of
transportation costs
5. Judgment of benefits and
20
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Impact/ Benefits
low
low
high
high
Solution portfolio
Ease of Implementation
SC–Reconfiguration
medium
medium
SC–Reconfiguration
Direct shipment
Transport Load
Optimization
Portfolio & Strategic
Development
VMI
Lead Time reduction
Forecasting Process
Supply chain delivery
performance
One set of performance metrics : A novelty aspect
Overview Metrics SCOR Level 1 Metrics Total BU PE PP
Median Process Industry Best in class Process Industry (02/05)
Delivery Performance (Commit date)
BOREALIS 95,5% n.c. n.c. 92% 99%
DEGUSSA (per) 72,7%
Order Fulfillment Lead Time 18,5 [days]
SOURCE (peroxides - MTF) 15 [days]
MAKE (MTF) 1 [days] 1 [days] 1 [days]
DELIVER 3 [days] 3 [days] 3 [days]
Supply-Chain Flexibility 95 [days] 5 [days]
SOURCE (per) ? [days]
MAKE240 [days] 240 [days] 240 [days]
DELIVER 0[days] 0 [days] 0 [days] Total Supply Chain Management Cost 9% 11% 7% 10% 2% Cost of Goods Sold 91% 86% 94% 78% n.c. Value-Added Productivity per payroll € 2,7 [€] 3,7 [€] 3,2 [€] 2,3 [€] n.c. Days of coverage (per) 32,7 [days]
Inventory Days Of Supply (RM) 3,8 [days] 7,4 [days] 1,8 [days]
Inventory Days Of Supply (all) 29,5 [days] 45,9 [days]19,9 [days] 51,3 [days] 40 [days] Days of Sales Outstanding 47,7 [days] 70 [days] 33,5 [days] n.c. n.c. Days of Payables 28,8 [days] 51,3 [days]17,1 [days] n.c. n.c. Cash-To-Cash Cycle Time 48,4 [days] 64,6 [days]36,3 [days] 55,1 [days] 40 [days]
Assets Asset Turns 3,6 turns 2,4 turns 5,3 turns 1,4 turns 4,5 turns
Supply Chain SCOR-Card (Level 1)
E X T E RNAL INT E RNAL Supply Chain Reliability Responsiveness Flexibility Cost Cash Cycle
DEGUSSA
BOREALIS
Overview Metrics SCOR Level 1 Metrics Total BU PE PP
Median Process Industry Best in class Process Industry (02/05)
Delivery Performance (Commit date)
BOREALIS 95,5% n.c. n.c. 92% 99%
DEGUSSA (per) 72,7%
Order Fulfillment Lead Time 18,5 [days]
SOURCE (peroxides - MTF) 15 [days]
MAKE (MTF) 1 [days] 1 [days] 1 [days]
DELIVER 3 [days] 3 [days] 3 [days]
Supply-Chain Flexibility 95 [days] 5 [days]
SOURCE (per) ? [days]
MAKE240 [days] 240 [days] 240 [days]
DELIVER 0[days] 0 [days] 0 [days] Total Supply Chain Management Cost 9% 11% 7% 10% 2% Cost of Goods Sold 91% 86% 94% 78% n.c. Value-Added Productivity per payroll € 2,7 [€] 3,7 [€] 3,2 [€] 2,3 [€] n.c. Days of coverage (per) 32,7 [days]
Inventory Days Of Supply (RM) 3,8 [days] 7,4 [days] 1,8 [days]
Inventory Days Of Supply (all) 29,5 [days] 45,9 [days]19,9 [days] 51,3 [days] 40 [days] Days of Sales Outstanding 47,7 [days] 70 [days] 33,5 [days] n.c. n.c. Days of Payables 28,8 [days] 51,3 [days]17,1 [days] n.c. n.c. Cash-To-Cash Cycle Time 48,4 [days] 64,6 [days]36,3 [days] 55,1 [days] 40 [days]
Assets Asset Turns 3,6 turns 2,4 turns 5,3 turns 1,4 turns 4,5 turns
Supply Chain SCOR-Card (Level 1)
E X T E RNAL INT E RNAL Supply Chain Reliability Responsiveness Flexibility Cost Cash Cycle
COMBINED
Overview Metrics
Shared SCOR Level 1 Metrics
Actual
"As-is"
"To-be"
(progress)
"To-be"
(success)
Competition
Median
Process
Industry
Best in class
Process
Industry
(02/05)
Delivery Performance (Requested Del.
date)
73%
85%
95%
92%
90%
95%
Forecast accuracy
65%
80%
90%
75%
n.c
n.c
Order Fulfillment Lead Time
SOURCE (peroxides - MTF)
15 [days]
8 [days]
10 [days]
n.c
SC Avg 2005 Inventory qty (Tons) -
Peroxides
332
10%
reduction
20%
reduction
SC Avg 2005 Consumption qty
(Tons/Month) - Peroxides
202
SC Inv days of supply (days) -
Peroxides
50 [days]
INT
E
RNAL
Cash Cycle
Degussa - Borealis Supply Chain SCOR-Card (Level 1 & 2)
E
X
T
E
RNA
L
Responsiveness
Supply Chain
Reliability
22
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Shared Supply Chain metrics (template)
Overview Metrics
Shared SCOR Level 1 Metrics
Actual
"As-is"
2005
Actual
"As-is"
Q1 2006
Actual
"As-is"
Q2 2006
"To-be"
(progress)
"To-be"
(success)
Competition
Median
Process
Industry
Best in class
Process
Industry
(02/05)
Delivery Performance (Requested Del.
date)
65%
66%
69%
85%
90%
90%
95%
Forecast accuracy
55%
58%
58%
70%
80%
n.c
n.c
Order Fulfillment Lead Time (days)
SOURCE (peroxides - MTF)
15
15
15
10
8
n.c
SC Avg 2005 Inventory qty (Tons) -
Peroxides
450
440
435
405
360
n.c
n.c
SC Avg 2005 Consumption qty
(Tons/Month) - Peroxides product mix
220
220
215
250
260
n.c
n.c
SC Inv days of supply (days) -
Peroxides
62
61
62
49
42
51 [days]
40 [days]
IN
T
E
RNAL
Cash Cycle
Degussa - Borealis Supply Chain SCOR-Card (Level 1 & 2)
EXT
ER
N
A
L
Responsiveness
Supply Chain
Reliability
Total identified SC savings & origin
Deliver
Source
100 %
Source
Return
Return
Deliver
Return
Return
Deliver
Make
Source
Make
Plan
Borealis
Degussa
Plan
24
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Savings breakdown
Overview Metrics
SC Value for
improvement (K€)
Pilot
Investment cost
(estimated K€)
Pilot
SC value scaled
up to other
business line (K€)
Supply chain reliability
295
40
1690
Responsiveness
50
0
274
Change management issues in a collaborative scenario
Typical barriers:
D
Shared vision feeding
mutual need & interest
D
Understanding about
business concepts &
opportunities
D
Trust & openness
between partners while
building reliable supply
chain operations
Change management
solutions:
D
Collaborative
workshops
D
Common definitions
(Reference model)
D
Commonly selected
Enhancing partner collaboration is key
28
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Conclusions
PROCESS
SCOR toolkit applied to the extended SC
SRM & CRM
Î
PRM
TOOLS
GOALS
Create & Share value through SC collaboration
A total of
2387 K€
savings identified
Business growth (new prod. devpt.) estimated at
3800 K€
Foster partnership
Competitive advantage
low
low
high
high
Innovation intensity
Strategic framework:
Æ
Landing to The Magic Quadrant
The
Magic
Quadrant
30
SCOR Borealis – Degussa
Supply Chain Improvements
SCOR Borealis-Degussa
Key take away message
D
Procurement is a viable source of value creation
D
Innovation, entrepreneurial spirit and creativity are
key attributes for procurement
D
The journey is not always long & difficult
D
