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Modeling Supply Chain Processes: A Review and Critical Evaluation of

Available Reference Models

Conference Paper · September 2013

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 Ponis S., GayIalis S., Tatsiopoulos I., Panayiotou N., Stamatiou D.R., Ntalla A.| Modeling Supply Chain
Processes: A Review and Critical Evaluation of Available Reference Models

Modeling Supply Chain Processes: A Review and Critical

Evaluation of Available Reference Models
Stavros T. Ponis Sotiris P. Gayialis Ilias P. Tatsiopoulos
[email protected] [email protected] [email protected]
National Technical University of National Technical University of National Technical University of
Athens, School of Mechanical Athens, School of Mechanical Athens, School of Mechanical
Engineering, Sector of Industrial Engineering, Sector of Industrial Engineering, Sector of Industrial
Management and Operational Management and Operational Management and Operational
Research, Heroon Polytechniou 9, Research, Heroon Polytechniou 9, Research, Heroon Polytechniou 9,
15780 Zografou, Greece 15780 Zografou, Greece 15780 Zografou, Greece

Nikolaos A. Panayiotou Dimitrios-Robert I. Stamatiou Athanasia C. Ntalla

[email protected] [email protected] [email protected]
National Technical University of National Technical University of National Technical University of
Athens, School of Mechanical Athens, School of Mechanical Athens, School of Mechanical
Engineering, Sector of Industrial Engineering, Sector of Industrial Engineering, Sector of Industrial
Management and Operational Management and Operational Management and Operational
Research, Heroon Polytechniou 9, Research, Heroon Polytechniou 9, Research, Heroon Polytechniou 9,
15780 Zografou, Greece 15780 Zografou, Greece 15780 Zografou, Greece

Abstract

In today’s business environment, supply chains involve a number of autonomous organizations. The nature of supply
chain processes with inter-organizational activities, involving different enterprises, calls for their design, analysis,
control and evaluation in a well-designed and structured manner. The increasing importance of business processes,
inevitably, puts process models in the epicenter of the majority of the efforts for achieving the required interoperability
and agility in dynamic supply chains. As a consequence, it is necessary to design or redesign efficient business process
models using supply chain process models. This can be achieved by reusing knowledge captured in reference process
models. The purpose of this paper is to study current research efforts and pinpoint those appropriate to serve as the
basis for the development of a supply chain reference model, focusing on demand variability management. In that
direction, a detailed literature review of available commercial and academic reference models followed by criteria-
based screening process is implemented. After examining the core concept and the basic principles behind each model,
comparing their strengths and weaknesses under a critical and original perspective, the GSCF – Global Supply Chain
Forum reference model is selected. Finally, in this paper, the Supply Chain Reference Model for Managing Demand
Variability (SC REMEDY) model is introduced; a decision, knowledge, IT and risk enhanced reference model that is
focused on demand variability management.

Keywords
Literature Review, Supply Chain, Modeling, Reference Models, Business Processes, SAP, SCOR, GSCF

1. INTRODUCTION
Supply chain management is increasingly being recognized as the integration of key business processes
across the supply chain (Croxton et al., 2001). Although the importance of supply chain relations is widely
acknowledged, seamless co-ordination is rarely achieved in practice (Trkman et al., 2007). Supply chain
performance can be improved through supply chain integration, and to that purpose, reference models
provide processes to support integration. In order to build links and relationships between companies,
there is a necessity for standard processes. According to Trkman et al. (2007), processes have five levels of
maturity (ad hoc, defined, linked, integrated, and extended). Reference models attempt to provide
extended processes for optimal performance. Because processes are now viewed as assets requiring
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Processes: A Review and Critical Evaluation of Available Reference Models

investment and development as they mature, the concept of process maturity is becoming increasingly
important as firms adopt a process view of the organization (Lockamy & McCormack, 2004).

In this paper, initially we present the results of a review and a criteria-based comparative analysis of
available supply chain reference models, for the particular needs of a research project, aiming to provide a
holistic approach for managing demand variability in contemporary supply chain networks. Then, the
Supply Chain Reference Model for Managing Demand Variability (SC REMEDY) is introduced, a decision,
knowledge, IT and risk enhanced reference model that is focused on demand variability management.

2. SUPPLY CHAIN REFERENCE MODELS

It is of critical importance to realize how complicated the process of developing a Reference Model (RM) is.
There is a tuple of aspects that need to be considered, examined and implemented during the creation of a
reference model, like the generic nature of described processes, the views that will be incorporated and the
tools and methods of representation. Previous efforts to list the available reference models include Naslund
& Williamson (2010) and Lambert et al. (2005). Both of these efforts pinpoint the SCOR (Supply Chain
Operations Reference Model), GSCF (Global Supply Chain Framework) reference models and the one
proposed by Mentzer et al. (2001). The CPFR (Collaborative Planning, Forecasting and Replenishment)
model, along with other modeling efforts, is also mentioned, still it is not considered a pure reference
model, but rather an initiative coupled with business practices and techniques combining the intelligence of
multiple trading partners in the planning and fulfillment of customer demand. Further research conducted
through the Scopus, SpringerLink and Google Scholar databases brought up the industrial SAP R/3 and SAP
APO process reference models along with two reference modeling efforts from Klingebiel (2008) and
Verdouw et al. (2011). In the remainder of this section, a short description of the aforementioned reference
models is provided, starting with SCOR RM, which as literature shows, is widely accredited and accepted in
both academia and business practice.

SCOR was developed by the Supply Chain Council (http://supply-chain.org/) in 1996 and is commonly cited
in contemporary literature (Stephens, 2001; Huan et al., 2004; Wang et al., 2010; Liu et al., 2013). It is a
business process reference model that links process descriptions and definitions with metrics, best practice
and technology (Wondergem, 2001). It aims to support communication between supply chain partners and
to make supply chain management more effective. SCOR 10.0 describes five basic processes (Plan, Source,
Make, Deliver, and Return), implemented in four distinct levels. The three first levels describe standardized
elements of the model that can be applied according to organizational needs (generic processes), whereas
level four describes the implementation of specific supply chain management practices, thus imposing
process instantiation.

GSCF was developed by the Global Supply Chain Forum (http://www.theglobalsupplychainforum.com/) in

1994. GSCF model, same as SCOR, focuses on processes that link the supply chain and on depicting the
physical flow of goods among members of a supply chain (Ellram et al., 2004). It is implemented through
three primary elements, the supply chain network structure, the supply chain business processes and the
management components. GSCF prescribes eight management cross-functional and cross-firm processes,
i.e. Customer Relationship Management, Customer Service Management, Demand Management, Order
Fulfillment, Manufacturing Flow Management, Supplier Relationship Management, Product Development
and Commercialization, and Returns Management. Each process is divided into a series of strategic sub-
processes, where the plan for the management of the process is defined, and a series of operational sub-
processes, where the process is updated. Every sub-process is consisted of a number of activities. Cross-
functional teams manage and implement each process.

Originating from the Information Technology (IT) territory, SAP R/3 and SAP APO reference models,
developed by SAP AG (www.sap.com), describe the two systems capabilities from a business scope and
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Processes: A Review and Critical Evaluation of Available Reference Models

depict the systems functions through graphical methods. They include the components hierarchy, the
process models, object models, data models, industry models and group models. The components hierarchy
groups the models functions according to specific operational criteria and describes the systems through a
functional lens (Kallrath & Maindl, 2006; Knolmayer et al., 2002). The process models depict, through
graphical representation, the functions and integration of the business processes offered by the SAP R/3
and SAP APO systems.

On the other hand, as mentioned earlier, CPFR is more of an initiative towards implementing a set of
business practices, rather than a reference model. Still, its wide acceptance and demand management
orientation, dictated the need for inclusion in our study. It was introduced in 1998, by the Voluntary Inter-
Industry Commerce Standards Association (VICS), by assembling a committee in order to record best
practices and create guidelines to be integrated to the framework. CPFR can integrate all members of a
supply chain to jointly develop demand forecasts, production and purchasing plans, and inventory
replenishments (Sari, 2008) These efforts resulted, according to Attaran & Attaran (2007), in the framework
becoming the third most used methodology for supply chain management improvement.

Leaning our study towards more academic and research oriented efforts, we identified the reference model
introduced by Mentzer et al. (2001). The authors, before presenting their model, conduct a broad research
on supply chain management theories and definitions and present a literature review. Then they formulate
their own definition for supply chain management and propose a reference model based on their definition.
The reference model is only described at a conceptual level and there have been no further efforts towards
its development.

Finally, the research efforts of Verdouw et al. (2011) and Klingebiel (2008) must be noted. The authors of
the first paper propose a framework based on the terminology and definition of SCOR 9.0 processes. They
introduce the Viable System Model (VSM) and Business Process Modeling Notation (BPMN) logic to the
documented processes in order to create a toolkit for modeling the supply chain. In the second paper, the
author provides a reference model for build-to-order (BTO) production by focusing on high level processes
in the automotive industry. She then describes the steps needed in order to instantiate her reference model
in other BTO industries. In both efforts, besides the high level process description, there is no analysis for
the lower level processes in their work.

Having studied the literature related with supply chain modeling and existing efforts towards the
development and application of supply chain reference models, in the next section we apply a screening
process based on predefined criteria, and finally select the most suitable one, for the needs of the research
project briefly presented in the beginning of the next section.

3. THE SELECTION PROCESS

The complexity of global supply chains, if poorly managed, often leads to increased cost structures which
severely deteriorate performance. Traditional supply chain management systems seem inadequate to cope
with increased demand variability as orders move upstream the supply chain, mostly due to the lack of
effective information flow, leading to poor integration and low supply chain visibility. The most common
symptom of myopic management is the accumulation of superfluous stock in various supply chain nodes
and the occurrence of shortages/stock-outs in other nodes, mostly at the retailer and distributor levels. The
work presented in this paper is part of a research project aiming to study the phenomenon of supply chain
variability, identify the physical points of its creation, analyze its causes and evaluate its negative impact on
supply chain performance. In the epicenter of these efforts lies the development of a reference model, over
and above the current state of the art research, enhanced with decision and risk mapping tools and
quantitative modeling support. In the remainder of this section, the process of selecting an existing supply
chain modeling approach in which the project will build upon is presented.
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Processes: A Review and Critical Evaluation of Available Reference Models

Based on the project’s panel of experts and their experience from previous projects, we established a set of
fifteen (15) selection criteria in order to assist the process of determining the more suitable model for the
research at hand. The list of criteria under study is shown in Table 1.

Table 11: Reference model selection criteria

Selection Criteria
1.Origin 6. Number of required actors 11. Demand variability management
2. Field 7. Process modeling method 12. Demand forecast
3. Number of levels of analysis 8. Level of agility 13. Focus on production
4. Number of main processes 9. Existence of best practices 14. IT coverage
5. Existence of sub-processes 10. Existence of metrics 15. Market acceptance

Next, weights were assigned to each criterion, based on expert’s opinion and an initial screening process
was imposed resulting in shortlisting SCOR and GSCF models, as providing the biggest coverage of the
criteria list items. Then, an internal discussion and thorough examination of each model was initiated. On
the one hand, the GSCF has a very broad scope which is considered both its strength and its weakness
(Lambert et al., 2005). Respectively, on one hand, there are increased opportunities for gaining value from
the supply chain; on the other hand, there are challenges to be faced during its implementation. An
organization cannot start implementing one process at a time due to the complex interfaces existing
between the eight processes. Such a scheme could lead to a lower than optimum performance. Also, the
cross-functional teams described in the model need to be committed to key suppliers and key customers in
order for them to function. GSCF is a better match for organizations with a market orientation due to its
position to assure resource alignment. It has a more strategic nature and focuses on increasing long-term
relationships and value along the supply chain. On the other hand, SCOR focuses on a narrower scope than
the GSCF, that being activities like purchasing, logistics and manufacturing. This makes it easier to
implement in most organizations since those functions are more likely to be integrated. But there is no
consideration of the marketing, finance and research and development functions of the organization and
this could potentially lead to lower levels of performance. SCOR lacks explicit connections between
functional strategies. One of its strengths is the set of benchmarking tools it provides, assisted by the Supply
Chain Council’s source of data and information. Another strength is the catalogue of best practices offered,
aiming at the improvement of transactional efficiency. SCOR is a useful tool for identifying areas of
improvement to achieve quick pay-back opportunities and satisfy top-management’s desire for cost
reductions and asset efficiency (Lambert et al., 2005).

The GSCF reference model is process oriented and constitutes a holistic supply chain model that is demand
driven, comprehensive, and flexible and meets the aims and particularities of our research. An organization
that adopts the GSCF framework is process oriented as every process that concerns a certain product or
service has to function in harmony with the rest of the processes. All activities are important for the
organization, but each organization can decide which activities are crucial according to its scope. It provides
a standard set of processes and analytical guidelines for their implementation. The model enhances the
organization’s cooperation with the rest of the participants of the supply chain, such as suppliers and clients
and signifies the important nodes which need to be tied firmly to the company. Each activity is thoroughly
analyzed encompassing all the necessary processes needed by an organization that wills to increase its
agility and capabilities throughout the supply chain.

The GSCF and SCOR 10.0 RM’s, originating from the fields of practice, both share common characteristics
within the criteria set, like the existence of five actors (from suppliers supplier to customers customer) in
both cases, the existence of best practices, the existence of metrics, the existence of sub-processes, the
level of focus on production, IT coverage, demand forecasting, demand variability management, the level of
agility and the degree of market acceptance. Despite these fields of similarity, they are actually two quite
different models. The GSCF provides a more comprehensive and extensive set of main processes that are
described in verbal fashion followed by basic graphical support in contrast to the plain verbal fashion of
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 Ponis S., GayIalis S., Tatsiopoulos I., Panayiotou N., Stamatiou D.R., Ntalla A.| Modeling Supply Chain
Processes: A Review and Critical Evaluation of Available Reference Models

SCOR. Each GSCF process is thoroughly analyzed and supported by best practices and specialists opinions
whereas, in SCOR, best practices are weakly connected to the processes. The total configuration of GSCF
provides economic value added, making it ideal for organizations with long term strategies.

Based on the results of the project team’s analysis and internal discussion, the GSCF model was selected as
an initial starting point and reference for the development of our decision, knowledge, IT and risk enhanced
reference model that is focused on demand variability management.

4. THE SUPPLY CHAIN REMEDY MODEL

Based on GSCF, we introduce the Supply Chain (SC) REMEDY model, with the following core characteristics,
a) Focus on demand variability management, b) Discrimination of strategic and operational functions, c)
Analysis of functions into long-term and short-term processes, d) Introduction of a framework of metrics for
SC performance measurement, e) Enriching the process model with add-on views of the supply chain, i.e.
decision, knowledge, information systems and risk views, f) Graphical representation of model with the use
of the ARIS Platform business process modeling tool.

The SC REMEDY model is concentrated on demand management variability and requires three elements:
supply chain structure, activities and management features; providing optimal and novel activities that
every organization can adopt in order to improve its ability to manage demand variability. Three tiers of the
supply chain are described in the model: the supplier, the organization and the client. The SC REMEDY
model builds on the strategic and operational discrimination of processes described in GCSF, adopting the
practice of cross-functional process management teams and the involvement of IT, and is constituted of
nine major cross-functional activities, as shown in Table 2. Each activity is divided into a strategic and an
operational level. The activities run across the length of the supply chain and cut through the functional
silos of the organization. The strategic level relates to the definition of the long-term implementation of the
activities and the operational level concerns the short-term implementation.

Table 2: SC REMEDY model – Cross-functional activities

Currently, the implementation of the SC REMEDY model is a work in process. Modeling efforts so far,
include the elaboration of the core value chain diagram of the model, its three (3) supporting organizational
charts (one for each implicated business entity, i.e. suppliers, organization, client) and the underlying
process decomposition into nine (9) function trees (one for each cross-functional activity, see Table 2) and
ninety two EPC (Event-driven Process Chain) diagrams. The modeling effort is complimented with an
Application System Diagram, providing a complete map of the IT infrastructural components supporting the
supply chain operation.

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Processes: A Review and Critical Evaluation of Available Reference Models

5. CONCLUSIONS AND FURTHER RESEARCH

As highlighted in the previous sections, a holistic approach to demand management in supply chains is
missing from the scientific literature and strategic business management in practice. The increased
variability between the stages of a supply chain is perhaps the most significant criterion for strategic supply
chain decisions, e.g. facility location, as it directly affects the efficient operation of the whole supply chain.
Existing supply chain reference models that propose actions to improve supply chain functions where
examined, evaluated and compared in order to provide a basis for a new reference model that focuses on
demand variability, the SC REMEDY. The proposed SC REMEDY model, aspires to address this situation by
providing an integrated modeling approach and a toolset to assist business entities in the establishment of
a supply chain management decision support structure. Remaining research efforts include the assessment
of contemporary Risk Management (RM) literature and the enrichment of the model with risk diagrams
related with demand management (REMEDY Risk view), the elaboration of a generic information systems
model (REMEDY IS view), the finalization of the knowledge view of the model (REMEDY Knowledge view,
see Gayialis et al., 2013; Ponis, 2006), the introduction of an innovative quantitative & algorithmic set of
methods into the model, related to demand management (REMEDY Decision View) and finally the
validation of the REMEDY model through its instantiation in carefully selected real-life cases.

ACKNOWLEDGEMENT
The research efforts described in this paper are part of the research project “A Holistic Approach for
Managing Variability in Contemporary Global Supply Chain Networks” in research action: “Thales - Support
of the interdisciplinary and/or inter-institutional research and innovation”, which is implemented under the
Operational Programme: Education and Lifelong Learning, NSRF 2007-2013 and is co-funded by European
Union (European Social Fund) and Greek Government.

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