Case Study: Siemens ‘SCOR’ a success1

Siemens AG, with over 450,000 people, sales of around €70 billion and operating in more than 190
countries it is one of the world’s top five electrical engineering and electronics companies, producing
products from mobile phones to power plants. For over a decade Siemens has used the Supply-Chain
Operations Reference (SCOR) model to improve its supply chain efficiency and process performance.
(The SCOR model is explained later in this chapter.) The implementation of the model was initially
intended to support the company’s move to a considerably stronger focus on e-Business. Teams of
more than 250 internal change agents were formed starting to review strategies, opportunities and
challenges.

Siemens initially developed what they called their “Generic Business Process” version of the SCOR
model so that it could be applied in all their markets. However Siemens soon realized that different
kinds of business required different supply chain solutions. For example, Siemens used SCOR to
streamline the Make-to-Order processes of its „Siemens Medical Solutions‟ Business whose
Computed Tomography (CT) devices are made in Germany and China. This was a particularly difficult
business involving “make-to-order” functions such as the global management of customer orders,
comprehensive and complex material management, customisation and production, technical
support, worldwide dispatch and logistics, and installation at the customer’s site. Yet while Siemens
were the clear innovation leader, before the SCOR initiative its inflexible and bureaucratic processes
had resulted in long waits for customers, high levels if inventory and high costs. The CT supply chain
was not connected, with little common understanding of how processes should work or what its
supply objectives should be. Internal operations managers in the supply chain answered to
Headquarters rather than to end customers and conflicting performance objectives led to fluctuating
demands throughout the chain. It was the SCOR process that helped Siemens the tackle these
problems directly. Order management and planning and control processes moved from individual
and fragmented order handling to the management of all worldwide customer orders, sourcing was
simplified and integrated using 22 „A suppliers‟ rather than the 250 used previously, production of
small quantities was organised according to customer specifications, strategic partnerships were
developed with service providers, quick installation of systems directly delivered to customer sites
using qualified CT factory personal was implemented, and “reverse logistics” employed to refurbish
used systems.

The improvements in supply chain performance were spectacular. Order to delivery time reduced
from 22 weeks to 2 weeks, the simplified and transparent order on the factories allowed two
production lines to do the work of the four used previously, factory throughput time was reduced
from 13 days to 6 days, flexibility was increased tremendously to a level of ± 50% orders per month,
inventory levels were reduced significantly enabling CT to divest a warehouse, direct shipments
nonstop from the factory to the customer enabled delivery to customer sites within 5 working days
and also allowed customers to track shipments.

1
Excerpt from: Slack et al (2010) Operations Management, 6th Edition, Financial Times Prentice Hall
 ANSWER THE FOLLOWING QUESTIONS BEFORE COMING TO THE LECTURE

1. Can SCOR be used, without adaptation in all of Siemens business contexts?

2. What problems did SCOR help Siemens to resolve?

3. How did SCOR help them to increase customer value and improve supply chain
performance?