SCOR Metrics - Is It Enough?

November 21, 2007 By: Ramlee Ibrahim Category: SCM

Supply-chain and manufacturing professionals have always used a large number of metrics to measure the health of their functional areas, because these areas tend to create most of the value for their companies, while also generating most of the company’s total expenses. These metrics were standardized and codified by the SCOR (The Supply-Chain Operations Reference-model) effort in the 1990s and early 2000s. So, the idea of measurement is not new to these professions. But how do traditional supply chain and manufacturing metrics fit into today’s emerging strategic dashboards? That is, how does SCOR fit with scorecards? First, a quick look back at the history of SCOR.

Metrics such as manufacturing through-put, error rate, on-time delivery, back-order percentage, days of supply, number of invoice errors, rework percentage, and dozens more have long driven the operations of supply chain management and manufacturing. In fact, SCOR was organized precisely because there were so many metrics and so many different ways to calculate them that a need was revealed to standardize them and promote the standardized definitions.

In 1996, the Supply-Chain Council was organized to do just this. The Council was made up of a consortium of supply-chain specialists from research organizations, manufacturers, distributors, retailers, and software vendors to these industries. In other words, the providers and consumers of the metrics collaborated together to create a standard set of indicators that could be compared across companies and industries, and could be captured and managed in the enterprise software applications that helped manage the physical goods and information about their movements.

It was a grand collaborative effort that took many years and a seemingly endless series of meetings, and it finally resulted in the standard SCOR metrics in the late 1990s and early 2000s. So far, so good. But do SCOR measures equate to a strategic scorecard? Can a supply chain professional simply put all the relevant SCOR measures for their business into a spreadsheet or a web page, and call it “my supply chain scorecard”?

Well, not exactly. At least, not if we’re talking about the kind of scorecard that is implied in today’s terms of “balanced scorecard” and “strategic dashboard.” These terms imply an understanding of the business goals and strategic direction that goes beyond just the functional metrics of a single operational area, as important as it may be, such as supply chain management or manufacturing.

The term “balanced scorecard” includes the idea of balanced strategic perspectives, with the recognition that a holistic view of the organization will yield better overall outcomes, be they revenue or profit (in commercial enterprises) or enhanced service to constituencies and increased constituent satisfaction (in governments and not-for-profits).

Also inherent in the balanced scorecard model is the idea of strategic alignment, i.e., these strategic dashboards or scorecards should explicitly show the linkages between the organization’s overall strategy and the various measurements, projects, processes, and intended outcomes that are occurring at all levels of the organization. When implemented correctly, these strategic scorecards and dashboards can help ensure that all employees are “pulling in the same direction” and their efforts every day are moving the organization towards its strategic goals.

To achieve this balance, strategic focus, and cause-effect alignment, a true balanced scorecard will include several strategic themes or dimensions, also called “perspectives.” Four common strategic perspectives are Learning & Growth, Internal Processes, Customer, and Financial.

Some organizations will use more and/or different perspectives to incorporate their stakeholders more effectively, such as Effective Partnerships, Constituent Involvement, Good Corporate Citizenship, or Environmental Stewardship. Regardless of the specific wording, a balanced scorecard should contain a mix of perspectives that express the overall strategic goals of the organization.

As such, the SCOR metrics can make up part of a balanced scorecard, rolling up for instance into the corporate-level scorecard in the Internal Processes perspective. Other aggregate measures (Order Fill Rate, Number of Invoice Errors, Back-Order Percentage) may roll up into the Customer perspective, since they directly impact the customers' experiences with the organization and the customers' level of satisfaction. Some cost measures (Cost of Manufacturing, Transportation Cost) may roll up into the Financial perspective, at least in an aggregated form (Total Expenses).

SCOR metrics may well make up the majority of the measures on a lower level scorecars, such as the scorecard owned by the Supply Chain or Manufacturing executive or manager. However, in a true balanced scorecard environment, even these cascaded scorecards should contain other perspectives,such as the Learning & Growth perspective (how well are we developing our employees and ourselves) or the Customer perspective (as described above). It is hard to imagine even a lowest-level scorecard in a true balanced scorecard environment that would not benefit from containing at least two of the organization’s overall strategic perspectives.

To answer the question posed at the beginning of this blog, SCOR is different than a scorecard, particularly given today’s understanding of the power of cascaded, deployed balanced scorecards. SCOR metrics and benchmarks certainly play an important role in the scorecard of a supply chain management or manufacturing functional scorecard, but in themselves they are not enough.

SCOR is fundamentally a list of metrics. A balanced scorecard or strategic dashboard is a management framework that drives strategic alignment and improves organizational performance. When deployed well (with cascaded leading metrics, aligned improvement projects, and well-honed review practices), the scorecard becomes the tool you use to drive improvement in your SCOR metrics.