Transforming your supply chain with IBM Supply Chain Process Modeler, Part 2: Using process reference models in supply chain transformation

In Part 2, you'll learn how to about the process reference models supported by SCPM and how you can use them in your supply chain transformation projects.

Changrui Ren (rencr@cn.ibm.com), Manager, Supply Chain Optimization, IBM

Changrui Ren photoChangrui Ren is the manager of Supply Chain Optimization team at IBM Research in Beijing, China. He joined IBM in 2005 after receiving his Ph.D. in Control Science and Engineering from Tsinghua University in Beijing, P.R. China. He has led multiple research projects on business process management, performance management, and supply chain management.



Bing Shao (shaobing@cn.ibm.com), Staff Researcher, IBM

Bing Shao photoBing Shao is a Staff Researcher at IBM Research in Beijing, China. He joined IBM in 2006 and has been driving activities to integrate industry process standard models with end-to-end supply chain transformation. He holds a Master's degree in Computer Science from Harbin Institute of Technology, Harbin, P.R. China.



Miao He (hmhem@cn.ibm.com), Researcher, IBM

Miao He photoMiao He is a Researcher at IBM Research in Beijing, China. She joined IBM in 2009 after receiving her M.S. degree in Industrial Engineering from Tsinghua University in Beijing, P.R. China. Her research interests include supply chain management, business process management, clinical decision making and stochastic dynamic programming.



Jin Dong (dongjin@cn.ibm.com), Leader, IBM China Analytics Center , IBM

Jin Dong photoJin Dong is the Cluster Executive of Industry Solutions at IBM Research in China. He is also the Leader of the IBM China Analytics Center. He received his Ph.D. from Tsinghua University P.R. China in 2001. Before joining IBM, he was the Research Assistant Professor in the Industrial Engineering Department of Arizona State University in the US.



25 January 2012

Also available in Chinese Russian

Introduction

This article introduces the process reference models and methodologies for supporting supply chain transformation projects.

This part has two sections. In the first section we will briefly review the main process reference models supported by SCPM: SCOR and APQC PCF. In the second section, we will discuss the step-by-step methodologies for using the reference models.

After completing this article, you should be able to:

  • Describe the Supply-Chain Operations Reference (SCOR) model.
  • Describe the American Productivity and Quality Center (APQC) Process Classification Framework (PCF).
  • Identify why process reference models and methodologies are necessary in supporting supply chain transformation projects.
  • Use the SCOR and APQC frameworks in SCPM to deliver supply chain transformation projects.

Process reference models

In this section you'll learn about two popular process reference models supported by SCPM, the SCOR model and APQC PCF, and learn why process reference models are important.

What are process reference models?

Process reference models integrate business process reengineering, benchmarking, and process measurement into a cross-functional framework. They aim to provide a standard reference for business process modeling and analysis. A process reference model typically contains:

  • Standard descriptions of management processes
  • A framework of relationships among the standard processes
  • Standard metrics to measure process performance
  • Management practices that produce best-in-class performance
  • Standard alignment to software features and functionality across different industries

A variety of process reference models, developed by various organizations, are readily available. Some popular ones that are widely adopted by practitioners are incorporated into SCPM, including:

  • SCC (Supply-Chain Council)
    • Supply-Chain Operations Reference (SCOR)
    • Design-Chain Operations Reference (DCOR)
  • APQC (American Productivity & Quality Center)
    • Process Classification Framework (PCF)

The SCOR model, developed by the Supply Chain Council (SCC), aims to "provide a unique framework that links business process, metrics, best practices and technology features into a unified structure to support communication among supply chain partners and to improve the effectiveness of supply chain management and related supply chain improvement activities".

In addition to SCOR, SCC manages and maintains another open standard reference model, the Design Chain Operations Reference (DCOR) model, which deals with the front-end management or product life cycle management of the supply chain.

The APQC PCF model is a cross-industry enterprise framework. It provides clear and common definitions for business processes and activities and enables fair comparison across industries.

Why use process reference models?

The process reference models are widely used because they bring many benefits, and provide a common language for the practitioners to communicate in the same terminology to ensure shared understanding.

Process reference models not only provide a common reference for business processes, but also set-up the basis for measurement. They provide standard KPI definitions to ensure that enterprises are using the same metrics when they comparing their business. Therefore, these process reference models are starting points for business improvement.

In the next sections, we'll briefly introduce the SCOR model and the APQC PCF.

The SCOR Model

The SCOR model is developed by the Supply-Chain Council (or SCC) and has been widely accepted as a cross-industry standard for supply chain management. SCC is a global not-for-profit organization formed in 1996. IBM was one of the founding members of this organization. The first version was released in 1997, and by June 2010 SCOR had evolved into version 10.0.

SCOR defines supply chain as the integrated processes of Plan, Source, Make, Deliver and Return, spanning from your supplier's supplier to your customer's customer, aligned with operational strategy, material, work and information flows.

Figure 1. The Supply Chain Operations Reference model
The Supply Chain Operations Reference model

SCOR provides:

  • Standard descriptions of the individual elements that make up the supply chain processes.
  • Standard definitions of key performance measures.
  • Descriptions of best practices associated with each of the process elements.
  • Identification of software functionality that enables best practices.

APQC PCF

APQC (American Productivity & Quality Center) is a member-based nonprofit consortium serving more than 500 organizations. It was founded in 1977 to help America respond to growing productivity pressures due to business generated from Japan. IBM was one of the founding members. Today, APQC is a global organization with members from all over the world. It is moving its focus towards knowledge management and core leading practice concepts.

Figure 2. APQC Process Classification Framework
APQC Process Classification Framework

The APQC PCF defines a series of 12 separate function-oriented processes. The 1.0 to 5.0 processes are called the operating processes, and categories 6.0 through 12.0 are management and support processes. The APQC PCF is used by member and non-member organizations. Although the framework was originally conceived around a manufacturing-type organization, there is evidence that all types of organizations, including educational institutions and governmental operations are using the PCF to help manage and guide their business operations.

IBM and APQC's cross-industry PCF

In 2008, APQC and IBM began to work together to enhance the cross-industry PCF and to develop a number of industry-specific process classification frameworks. Based on the renowned PCF, a taxonomy of cross-functional business processes intended to allow objective comparison of performance within and among organizations, and the support of IBM, the industry PCFs enable more industry applicable content by outlining and defining processes and activities specific to different industries. IBM provided the subject matter expertise and intellectual property to create the industry-specific business process classification frameworks, as part of the IBM's continuing leadership in the promotion of open standards to help organizations evaluate and measure business processes at an industry level.


Using SCOR/APQC PCF in supply chain transformation

This section shows you step-by-step how to use the SCOR model and APQC PCF supported by SCPM in a supply chain transformation project.

A powerful tool is very helpful to the success of a transformation project. However, a tool becomes a solution only when a comprehensive methodology support is developed. The methodology guides the users on when and how to leverage the tool, for example, by identifying the suitable scenarios and phases to use the tool, selecting the right functions in a particular project phase, and illustrating how to effectively use the tool and its functions in each project phase.

Figure 3 depicts the methodology for using process reference models such as SCOR and APQC PCF in supply chain transformation projects. This methodology includes five stages of the delivery phase. Please note that there is a selling phase before the delivery phase, for client and internal projects.

Figure 3. Supply chain transformation roadmap
Supply chain transformation roadmap

The following sections describe each phase in more detail.

Phase 0: Build organizational support

The main objective of this phase is to find a supporter within the company who believes in the project and has the ability to lead it. Executive buy-in and sponsorship is also required for project success. With a leader and sponsor in place, the next step is establishing a core business team that is committed to the project and agrees with the approach. Gaining acceptance will likely require general education related to project methodology, such as SCOR or APQC PCF and how it will be applied specifically for the client.

Phase I: Discover the opportunity

Phase I creates the business case to justify the engagement. This stage is when the business team identifies performance opportunities. Supply chain discovery can be visualized as a three-dimensional box of questions. The first dimension asks about the performance level of the supply chain operation. The second dimension inquires whether the right strategy, information, and material flows are available to support the desired performance level. The third dimension delves into other performance factors such as organizational, process, and technology issues that might impact the supply chain and also into understanding people-related factors such as skill, knowledge, and ability that will be critical to the success of the project.

A key output of Phase I is a project charter, which organizes the opportunity into an approach, budget, organization, measures for success, and communication plan.

Phase II: Analyze basis for competition

In the analysis phase the business goals (metrics and capabilities) are compared to as-is capabilities and operational performance. Depending on the type of project one or more proven techniques can be applied for root cause analysis:

  • Process simulation: Validates performance influencers in a model of the process. It can also be used to validate design assumptions and what-ifs in the design phase.
  • Benchmarking: Compares qualitative or quantitative scores of current state with peer performance.
  • Process maturity: Qualitative analysis of processes against CMMI model.
  • Six Sigma/Lean: Time value maps, waste analysis, pareto charts, and so on.
  • Issue tests: Validate start-of-project issues with the newly gained process knowledge. Is what we assumed we would do achievable?.

After the analysis, opportunities are identified based on the root causes. Examples of opportunities include process break/fix, automating repetitive transactions, centralization of information, outsourcing, process consolidation, and more. Opportunities can be categorized based on impact and cost/risk, then used to help prioritization of projects.

Phase III: Design material flow

The design phase is divided into material flow design (Phase III) and work and information flow design (Phase IV). In the design phase, opportunities are translated to the to-be or future state process. Material flow and work/information flow are the two key components for defining as-is flows, uncovering disconnects in your processes, and mapping out to-be flows that eliminate these gaps. The basic questions addressed are: What are my material flow problems and what is it worth to solve them? How efficient are my work and information flows and what is it worth to change them?

The design phase includes two steps: as-is and to-be. As-is documentation is used to understand what already exists, while the to-be state refers to all assets that determine the aspects of:

  • Process (what and how is it done)
  • People (who does and who owns it)
  • Technology (that it is supported by)
  • Metrics (how do you know it works)
  • Reason (why is it done)

Additional aspects that may be captured dependent on the project are skills and architecture.

Process reference models provide standards for process and metrics which can ensure reusability, consistency and repetition of work in this phase.

Phase IV: Design Work and Information Flow

Phase 3 focuses on the design of high-level supply chain process models, that is, the supply chain network. While in Phase IV, the work and information flow are designed as transaction-level processes.

As in the design of the material flow, Phase IV also needs the as-is and to-be models.

Phase V: Implement supply chain changes

In the implementation phase the to-be state is presented in appropriate formats. The types of change determine the format of the output, which includes project plans (business or IT), business requirements documents, workflow (task level), training plans, education materials, and so on.

The implementation phase is integrated with the set-up phase of business and IT change projects.


Summary

After going through the supply chain transformation methodology, you've learned that there are many technologies and tools that need to be used in different phases of a project. SCPM provides functions to support each of the major phases in a supply chain transformation journey. These functions in SCPM together with the methodology we introduced in this article make SCPM a useful solution for supply chain transformation projects, as illustrated in Figure 4.

Figure 4. SCPM support for Supply Chain transformation engagements
SCPM support for Supply Chain transformation engagements

Having completed this article on using process reference models in supply chain transformation, you should now be able to:

  • Describe the Supply-Chain Operations Reference (SCOR) model.
  • Describe the American Productivity and Quality Center (APQC) Process Classification Framework (PCF).
  • Identify why process reference models and methodologies are necessary in supporting supply chain transformation projects.
  • Recognize ways to use the SCOR and APQC frameworks in supply chain transformation projects.

Downloads

DescriptionNameSize
Sample ABC ProjectABC_Project.zip1.3MB
SCPM offeringSCPM_Package_Offering_v7.0.0_20110907.zip16.8MB

Resources

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