Supply Chain Management Frameworks
Supply chain management has become a critical component for modern businesses to stay competitive by improving operational efficiency. It involves managing the flow of goods and services from materials to the end-user, with many different companies and systems involved in the process.
In today’s highly competitive global market, many companies are compelled to improve the efficiency and success of their supply chains. Without effective supply chain management, businesses can face negative effects on their bottom line, dissatisfied customers, and wasted funds.
One of the main avenues to improve the entire supply chain performance in today’s business environment is a better understanding of the behavior of processes within the supply chain.
Enter supply chain management frameworks. These frameworks offer businesses a structured approach to analyzing and optimizing their supply chain activities, with the ultimate goal of enhancing supply chain success.
In this article, we’ll take a closer look at some of the most effective and widely-adopted SCM frameworks, and explore how they can help businesses achieve a sustainable competitive advantage in today’s complex and ever-changing marketplace.
Overview of Supply Chain Frameworks
Supply chain management frameworks are established models or approaches that provide a structured way of managing and optimizing the supply chain. These frameworks outline the various steps involved in the supply chain process and help businesses identify key areas for improvement.
Supply chain management frameworks have existed in some rudimentary form since the very first products and services were created and sold. As new technologies and approaches emerged, supply chain management became more sophisticated, and companies began to adopt more comprehensive frameworks to manage their supply chain operations.
The importance of having a framework for supply chain management is perhaps most evident with the rise of e-commerce and the increasing demand for fast, reliable shipping. To keep up with the expectations of today’s consumers, businesses need to be able to deliver their products quickly and efficiently, which requires a well-designed and -managed supply chain.
Today, there are several types of supply chain frameworks, each with its own unique approach and focus. One of the most widely adopted is the Supply Chain Operations Reference, or SCOR, framework. This model has quickly become a revolutionary tool for companies and their supply chains, with many major companies adopting it.
Two other popular supply chains are the Global Supply Chain Forum (GSCF) model and the Design-Chain Operations Reference (DCOR) model. Deciding which of these three popular frameworks is best suited for your organization will depend on your business size, industry, and specific supply chain challenges.
We break down each of these frameworks in the next section, including the key features, benefits, and how to implement them.
The Supply Chain Operations Reference (SCOR) Model is a valuable management tool for evaluating the effectiveness and efficiency of sales and operational planning (S&OP) in supply chain management.
Developed by the Supply Chain Council (SCC), the SCOR model provides a standardized framework for understanding and improving supply chain processes. This SCM framework integrates concepts such as benchmarking, measurement, and reengineering. This allows for a comprehensive view of business processes required to satisfy customer demands.
The standardized set of performance metrics is categorized into five attributes: reliability, responsiveness, agility, costs, and asset management efficiency. To measure these metrics, the SCOR model uses three levels of evaluation to ensure that supply chain performance can be compared across different organizations and industries.
- Level 1: Defining the scope, including the geographies and context.
- Level 2: Configuring the supply chain, including geographies, segments, and products.
- Level 3: Identifying the key business activities within the supply chain and processing element details.
The SCOR framework encompasses all customer interactions from order placement to invoice payment, including materials, services, and market interactions.
The process outlined in the SCOR model serves as a typical example of what occurs in supply chain management. Although your organization’s priorities may vary, and certain steps may not align with your goals, most companies can benefit from using SCOR to structure their supply chain.
The SCOR model is built around five management processes that continuously repeat in a process that starts with the supplier and ends with the customer. The success of each step is necessary for the supply chain to function efficiently.
The first component, ‘Plan’, involves creating a supply chain strategy and developing plans to achieve it. The typical activities involved in this process are supply and demand planning, sourcing strategy development, and inventory planning.
This involves all processes of procuring goods or services to meet a real or anticipated demand. Activities include selecting suppliers, negotiating contracts, and placing orders. Additionally, it involves evaluating supplier performance and managing supplier relationships.
This phase should also determine the best time to receive, verify, and transfer products within the supply chain.
This phase focuses on manufacturing and production processes, i.e. transforming raw materials into the final product to meet planned or actual demand.
The ‘Make’ process helps determine whether to make-to-order, make-to-stock, or engineer-to-order. It includes activities such as production planning, packaging, staging, and product release, as well as managing equipment and facilities.
This component emphasizes order fulfillment and delivery, that is, getting the product from the warehouse to the customer. It involves receiving customer orders, invoicing customers, and distributing and transporting orders.
Some of the most important activities in this phase are customer service, managing product lifecycles, finished inventories, asset management, importing/exporting requirements, and transportation.
The final process involves handling the return of defective products, containers, and packaging. It includes applying business rules, managing reverse logistics, and regulatory requirements. Companies should also have sustainable practices in place such as recycling and disposal services.
The return process also extends to post-delivery customer satisfaction, support, and follow-up.
The GSCF, or Global Supply Chain Forum, is another widely recognized framework for identifying crucial processes in supply chain management. This framework outlines eight key processes that form the foundation for supply chain management, including:
- Customer Relationship Management
- Customer Service Management
- Supplier Relationship Management
- Demand Management
- Order Fulfilment
- Manufacturing Flow Management
- Product Development and Commercialization
- Return Management
These processes intersect with every function of the business, cutting across all pillars of the organization such as marketing, research and development, finance, production, purchasing, and logistics.
To facilitate the implementation of the GSCF framework, each of these pillars is further divided into specific strategic sub-processes.
Where the SCOR model focuses on the logistics, operations, and procurement functions, the GSCF model involves all business functions.
Customer Relationship Management
Customer Relationship Management is an essential process that aims to enhance customer loyalty and retention by providing tailored products and services. It involves understanding customer needs, preferences, and feedback to develop and maintain relationships with them.
Customer Service Management
Customer Service Management operates at the customer interface, providing a key point of contact for administering the Product and Service Agreement (PSA).
It ensures customer requirements are met, and customer satisfaction is maintained by providing information on orders, shipping dates, and product availability.
Supplier Relationship Management
This process describes how a company interacts with its suppliers. It involves forming collaborative relationships with suppliers to ensure the company obtains the necessary goods and services to meet customer demand.
Devising the right PSAs and managing them appropriately is also key to good supplier relationship management. This is important for both the company and its suppliers to continue benefitting from the most favorable trading arrangements.
Demand management helps companies proactively match supply with demand. Activities are focused on increasing flexibility and reducing demand variability by forecasting and synchronizing supply and demand.
By employing historical sales information, planned marketing effort, and customer intelligence, companies can effectively forecast and influence demand.
Order Fulfilment is the cornerstone of supply chain excellence. It encompasses all the activities required to deliver products or services to customers while meeting their expectations and maximizing profitability.
To achieve this, the process should be implemented with the coordination of key suppliers and customers. By doing so, a seamless process can be developed from the supplier to the organization and to its various customer segments, ensuring that customer orders are fulfilled on time and in full.
Manufacturing Flow Management
Manufacturing Flow Management deals with all activities required to move goods through production, including obtaining, implementing, and managing manufacturing flexibility in the supply chain.
This process encompasses the entire supply chain, extending beyond the production site. This reflects the ability to manufacture a wide variety of products effectively and efficiently.
Product Development and Commercialization
The process of Product Development and Commercialization creates a framework for developing and launching products to the market in collaboration with customers and suppliers.
By working together, the product development and commercialization team and customer relationship management can help in:
- Identify customer needs and preferences, both those that are explicitly expressed and those that are unspoken or implied.
- Select the right materials and suppliers with the help of the supplier relationship process.
- Develop production technology and integrate it into the manufacturing flow to create the most efficient supply chain for a given product and market combination.
Returns Management is the process of handling and managing product returns, which involves various activities such as reverse logistics, gatekeeping, and avoidance.
Effective management of product returns is crucial for businesses to maintain customer satisfaction, minimize costs, and maximize profitability.
When implemented correctly, it offers an opportunity for competitive advantage. By analyzing the reasons for product returns, companies can identify opportunities to improve customer satisfaction and reduce unwanted returns.
Additionally, the control of reusable assets such as containers and packing can result in cost savings and sustainability benefits.
Returns management also serves as an important link between marketing and logistics, and a successful strategy requires coordination across key members of the supply chain.
The Design-Chain Operations Reference (DCOR) model is a framework that outlines the different business processes involved in satisfying a customer’s demand for a product.
Like the SCOR model, it is based on five primary management processes, namely:
By using these building blocks, the model can describe simple or complex design chains using a common set of definitions. This enables connections to be made between contrasting industries to describe the scope of nearly any design chain.
The DCOR model has proven effective in describing and improving design chains for both global and site-specific projects, spanning product development and research and development. However, it does not cover all business processes or activities – such as sales and marketing (demand generation) and some aspects of post-delivery customer support.
The ‘Plan’ component of this framework involves the process of establishing action plans to meet design-chain requirements.
This is the process of identifying research topics, obtaining and synthesizing information, and evaluating and publishing research findings. It also includes the sourcing and validating of materials and products.
This involves the process of refreshing existing products and creating, analyzing, testing and releasing the form, fit, and function of products.
The ‘Design’ component also includes reviewing and adjusting sourcing, manufacturing, testing, servicing, and disposable processes.
These are the processes necessary for the integration and release of refreshed and new product definitions to the supply chain for execution. it also includes sending the refreshed and new product design documentation to marketing and support organizations.
Lastly, ‘Amend’ is the process of gathering and analyzing product design issues and manufacturability feedback for current products.
Other Supply Chain Frameworks
Other popular supply chain frameworks include:
- The Customer Chain Operations Reference (CCOR) model
- The Product Life Cycle Operations Reference (PLCOR) model
- Managing for Supply Chain Performance (M4SC) model
The CCOR model is a newer operations reference model created by the Supply Chain Council (SCC) and developed by the Hewlett-Packard Business Process Management Group in 2004.
CCOR consists of five processes, namely: Plan, Relate, Sell, Contract, and Assist. The model follows a similar format to the SCOR model, using comparable notation, definitions, and presentation.
The purpose of CCOR is to provide a structure for customer interactions in the sale and delivery of a product, with a significant focus on relationship processes. This is evident in the inclusion of the Relate, Contract, and Assist processes, which all involve the customer relationship.
The PLCOR model is a framework that outlines the various stages of a product’s lifecycle, from the initial idea to widespread adoption in the market. This model was also developed by the SCC as a reference model for product innovation, product development, and portfolio management.
PLCOR consists of six key processes: Plan, Ideate, Develop, Launch, Revise, and Enable. This model provides a structured approach to effectively managing a product in the supply chain, helping organizations to reduce costs, increase efficiency, and improve the quality of their products or services.
Lastly, the M4SC is an SCM framework that provides a standard language for supply chain professionals and teams and a blueprint of key activities needed to effectively manage supply chains.
This model focuses on translating business strategies into supply chain execution plans and policies. The key capabilities of the M4SC model include Align Strategy, Networks, Processes, and Resources.
Implementation of a Framework in SCM
Despite there being several different and somewhat competing frameworks for supply chain management (SCM), there is no commonly accepted framework. Additionally, there is little consensus on how an SCM framework should be implemented and measured, as this varies between countries and industries.
Although, there are general steps and tips to take into account when implementing an SCM framework. Implementing a framework in SCM can be a complex task, but it can lead to significant improvements in efficiency, cost savings, and customer satisfaction.
Here are the key steps to follow:
Know Your Business Needs
Before choosing the best framework for your organization, it’s important to know what your business needs, both in the short and long term. Conducting an audit of existing systems and processes, gathering feedback from staff and stakeholders, and having a well-defined vision for the future of your business and supply chain are some of the ways to achieve this.
Once you have a clear understanding of what you need, you can develop a realistic plan.
Create a Realistic Implementation Plan
Implementing a new framework is a big undertaking, so it’s important to lay out a roadmap and define what success means for your business.
This plan should include objectives, milestones, key activities, and timelines. It should also include a map of key stakeholders and what their roles in the process will be. There’s no doubt that metrics to measure success, such as the accuracy of demand forecasting, revenue growth, and customer experience, are also essential to include.
You should be as realistic as possible about timelines and budgets throughout your planning. Things often take much longer and cost much more than originally expected, so conduct a thorough costing and timing exercise to anticipate the most likely scenario.
Be Aware of Risks and Limitations
Collaborate with key stakeholders to identify a list of the issues likely to come up along with this implementation. Once you’ve identified the potential risks, clarify on the potential consequences and what can be done to mitigate these.
This is an important exercise in being prepared, but will also be a helpful tool in easing the concerns of stakeholders and showing that potential pitfalls are being taken into consideration.
Involve Suppliers from an Early Stage
Given that a company’s supply chain management solution relies on collaborating with suppliers, it’s important that they understand their role in the implementation process.
While some may be hesitant about the new framework, there will always be early adopters among suppliers. These suppliers can recognize the benefits of the improved structure and processes that the new framework can bring, which in turn, can help drive efficiency.
Gain Trust and Commitment
In most cases, implementing a new supply chain management framework can mean that procedures will change. Change can be difficult for employees, especially those most impacted by new procedures, as well as stakeholders.
Therefore, it’s important to communicate why this framework implementation is necessary, what the benefits are, and how employees and stakeholders can take ownership of their role in the new SCM strategy. This will give you the best chance of obtaining buy-in and high performance from your employees.
Focus on Data
To make effective decisions and optimize the supply chain, it’s crucial to implement an analytics-based supply chain plan along with the framework.
While the framework will help in providing a standardized way of thinking about and managing the supply chain, an analytics database will help in identifying key metrics on where change and optimization are needed.
This not only serves as a vital tool for your organization but also for sharing real-time information both internally and externally with supply partners.
Monitor the Framework
Finally, it’s crucial to continuously monitor and evaluate the effectiveness of the new framework in supply chain management. This involves regularly assessing its impact on the supply chain process and how frontline staff are adapting.
A well-defined monitoring plan should be put in place, and feedback from employees and internal/external partners should be actively solicited and analyzed.
Consistently monitoring the framework will provide valuable insights into supply chain efficiency and excellence, including product/service quality, production management, and logistics management.
Benefits of Using a Supply Chain Management Framework
Better Collaboration with Suppliers & Customers
A well-defined SCM framework enables businesses to establish strong relationships with suppliers by ensuring they’re aligned with the business’s objectives, standards, and constraints.
By setting clear expectations for the supply chain process, businesses and suppliers can work together to achieve common goals, such as timely delivery, quality control, and cost optimization.
This collaboration not only improves the effectiveness of the framework and efficiency of the supply chain, but it also minimizes the risk of quality control issues and, in turn, dissatisfied customers.
Additionally, the increased efficiency and accuracy of the supply chain allow for better communication with customers regarding their orders.
An SCM framework can help keep track of each stage in the supply chain and ensure customers remain up to date on the status of their orders.
Improved Visibility and Control Over Supply Chain Processes
SCM frameworks, especially the GSCF model, help in improving visibility and control over supply chain processes. By analyzing data and investing in solutions, businesses can keep track of every moving part from production management to logistics management.
A well-defined SCM framework enables businesses to gain insight into their supply chain to help make informed decisions about how to optimize. This includes identifying potential bottlenecks, risks, and areas for improvement.
Having visibility and control over the supply chain is essential for businesses to quickly respond to unexpected disruptions.
Increased Efficiency and Productivity
By providing a structured approach to analyzing and optimizing their supply chain activities, an SCM framework ensures that everyone involved is following the same guidelines and procedures. This eliminates confusion and reduces the risk of errors or delays caused by inconsistent practices.
By using a SCM framework, businesses can analyze and benchmark their current processes, practices, and technologies, and identify the gaps and opportunities for improvement. It can also be used to design and implement best practices and standards.
These practices and standards can aid in streamlining and optimizing supplier management activities, such as sourcing, auditing, contracting, ordering, and invoicing.
Businesses will benefit from real-time visibility at every stage of the supply chain that a framework suggests. This allows organizations to effectively communicate key concerns, allocate resources, and streamline productivity.
Enhanced Customer Satisfaction & Loyalty
An SCM framework ensures that all stakeholders, employees, and suppliers are aware of their responsibilities and timelines, allowing for better coordination of processes. This can result in quicker order processing, more accurate inventory control, and more efficient production schedules.
This all translates to happy customers. When customers receive their orders on time and in good condition, they’re more likely to be satisfied with their experience and continue doing business with the company.
What is a supply chain management framework?
A supply chain management (SCM) framework is a tool and approach to help businesses evaluate the efficiency of their supply chain. There are different types, each with its own set of key performance metrics and key features. Some can be applied across all niches while others are for specified business processes and supply chains.
What are the benefits of using a supply chain management framework?
Implementing a supply chain management (SCM) framework provides a comprehensive approach to addressing potential future processes and supply chain issues, thus helping to avoid crises.
An SCM framework incorporates all supply chain planning and execution processes from demand management to customer delivery. This visibility and control over the supply chain can help organizations enhance their operational efficiency, improve customer satisfaction, and reduce costs and risks.
How do I choose the right supply chain framework for my organization?
There are various types of supply chain management (SCM) frameworks, each with its own set of key performance metrics and key features. Some can be applied across all niches while others are for specified business processes and supply chains.
When it comes to choosing the right one for your organization, you’ll need to consider various factors, such as the size of your business, your supply chain processes and challenges, and how a particular framework aligns with your business objectives.
Supply chain management (SCM) frameworks have proven to be useful tools over the past few years, especially with the rise of new technology and changes in consumer behavior.
By providing organizations with a structured approach to analyze the efficiency of their supply chains and identify areas for improvement, businesses can remain competitive in an ever-changing market.
Although there are several popular frameworks to choose from, such as the SCOR model, GSCF model, and DCOR model, selecting the right one for your organization will depend on your business needs, industry, and specific supply chain challenges.
While implementing and using these frameworks may come with challenges, the benefits of improved visibility, efficiency, and customer satisfaction make it worth the investment.