Summary:
This paper discusses the benefits of shorter planning cycles, using the performance metrics of the APICS Supply Chain Operations Reference (SCOR) Model.
Supply Chain Operations Reference (SCOR) Framework:
The performance metrics areas in the SCOR framework are: Reliability, Responsiveness, Agility, Cost, and Asset Management.
Reliability:
| RL.1.1 Perfect Order Fulfillment, percentage of orders meeting delivery performance with accurate documentation and no damage. | |
| RL.2.1 Percent of Orders Delivered in Full
RL.2.2 Delivery Performance to Customer Commit Date |
Faster recognition of changes in demand, enabling re-planning of production from lower demand to higher demand items. |
| Faster recognition of increases to dependent requirements for components and sub-assemblies in order to support production. | |
| Plan is based on customer orders and a more accurate near term demand forecast. | |
Responsiveness:
| RS.1.1 Order Fulfillment Cycle Time, average cycle time to fulfil customer orders | |
| RS2.1 Source Cycle Time | Ability to evaluate the capability of the component supply base to support large orders and promotions. |
| RS2.2 Make Cycle Time | Ability to commit production capacity to support large orders and promotions. |
Agility:
The agility measure has three components:
- The time required for a business to change its output level is called flexibility. Flexibility only has an upside component, since there is always the option to flex down immediately by curtailing production.
- The level of the output change that can be made in a given period of time, in a way that is sustainable and without a significant increase in unit cost is called adaptability. Adaptability is measured on both the upside and the downside.
- Value at Risk is the ability to respond to and mitigate supply chain risk.
| AG.1.1 Upside Supply Chain Flexibility, number of days to achieve a sustainable increase in quantities delivered. | |
| AG2.1 Upside Source Flexibility | Faster recognition of the need to increase component supply to support increased production.
Longer lead-time to negotiate increased volumes or find alternative suppliers. |
| AG2.2 Upside Make Flexibility | Faster recognition of the need to increase production.
Increased lead-time to reallocate and train additional staffing, procure equipment, or source from contract manufacturing. |
| AG2.3 Upside Deliver Flexibility | Ability to quickly evaluate alternative transportation modes and lanes to speed delivery to the distribution warehouses or customers in order to support a volume increase.
Longer lead-time to obtain additional transportation and warehousing capacity. |
| AG1.2 Upside Adaptability, the maximum sustainable increase in quantity that can be delivered in 30 days without a significant increase in cost per unit. | |
| AG2.6 Upside Source Adaptability | Faster recognition of component constraints allows more time to develop alternative sources of supply or alternative bills of material/formulations.
Faster recognition of the need to increase component supplies spreads the impact over a longer period and gives a softer ramp up for the suppliers. |
| AG2.7 Upside Make Adaptability | Faster recognition of production bottlenecks, allows more time to develop alternate routings, supply from alternate sites or contract manufacturers, move/repurpose equipment, or procure new equipment.
Faster recognition of staffing and other resource constraints allows more time to develop alternatives, procure additional resources, and reallocate or retrain staff.
Faster recognition of the need to increase production spreads the impact over a longer period, allowing more to be delivered sooner and provides a softer ramp up to the increased volume. |
| AG2.8 Upside Deliver Adaptability | Increased lead-time to procure carriers, 3PL facilities, material handling equipment. |
| AG1.3 Downside Adaptability, the sustainable reduction in quantities ordered, at 30 days prior to delivery, with no inventory or cost penalties. | |
| AG2.11 Downside Source Adaptability | Faster recognition of the need to reduce component supplies spreads the impact over time and reduces excess inventory. Provides a softer ramp down for suppliers. Results in lower supply costs or volume penalties and lower inventory holding costs. |
| AG2.12 Downside Make Adaptability | Faster recognition of the need to reduce production allows staff and equipment to be redeployed sooner, and reduces excess finished product and work in process inventories.
Provides a softer ramp down of staffing and production volume. |
| AG.1.4 Overall Value at Risk | |
| AG.2.15 Value at Risk, Plan | Standard processes and planning tools enable other locations or planners to cover for absences, system failures, natural disasters, political events, or peak workloads in the planning system. |
| AG.2.16 Value at Risk, Source | Faster recognition of sourcing failures, ability to peg the impact of the failure to products, equipment, and customers. Faster and better evaluation of alternate sourcing scenarios to mitigate the failure. |
| AG2.17 Value at Risk, Make | Faster recognition of producing plans that are off track, ability to identify the impact on products and customers, faster and better evaluation of alternative production plans. |
| AG2.18 Value at Risk, Deliver | Faster recognition of deployment plans that are off track. Ability to evaluate alternative sources and transportation modes. Ability to evaluate alternatives to recover from system failures, natural disasters, or political events. |
Cost
| CO.1.001 Total Cost to Serve | |
| CO.2.001 Planning Cost | Ability to execute shorter planning cycles with the same or less staffing. |
| CO.2.001 Sourcing Cost | Shorter cycles enable a smoother and more synchronized translation of demand to the component supply base, resulting in less overhead to manage and change material orders. |
| CO.2.003 Material Landed Cost | Shorter cycles enable a smoother and more synchronized translation of demand to the component supply base, resulting in better utilization of supplier capacity and reduced expediting costs, ultimately reducing the cost of purchased components. |
| CO.2.004 Product Cost | Demand forecasts are more accurate in the near term. Shorter planning cycles reduce waste and lost productivity due to changes in the production schedule within the frozen or firm zones.
Reduction in setup times and scrap/waste due to optimum sequencing. |
| CO.2.005 Order Management Costs | Shorter planning cycles result in a higher delivery reliability, reducing order tracking, change, and follow-up costs. |
| CO.2.006 Order Fulfillment Costs | Shorter planning cycles result in a higher delivery reliability, reducing expediting costs. |
Asset Management
| AM1.1 Cash to Cash Cycle Time | Cash to Cash cycle time is inventory days + accounts receivable days – accounts payable days. Shorter planning cycle times reduce the inventory days component. |
| AM1.2 Return on Supply Chain Fixed Assets | Increased utilization of production, warehouse, and transportation assets, per the discussion in other metrics above. |
| AM1.3 Return on Working Capital | Safety stock is related to a safety factor based on the accuracy of the demand forecast, and the lead-time needed to respond to a change in demand.
· A shorter planning cycle time reduces the lead-time to respond to a change in demand, reducing the need for safety stock.
· Demand forecasts are more accurate for a near period, therefore a shorter planning cycle reduces the safety factor.
Other advantages of shorter planning cycles, discussed in the metrics above, will reduce excess and inactive inventory. |
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