SCOR Level 1 Metric: AM.1.2 Return on Fixed Assets

Every link in the supply chain needs to demonstrate value. Companies that optimize their use of warehouses, machinery, transportation fleets, and other long-term assets are better positioned to boost profitability, maintain resilience, and deliver exceptional customer value. This is where the SCOR metric AM.1.2 Return on Supply Chain Fixed Assets comes into play.

What Is Return on Supply Chain Fixed Assets?
Return on Supply Chain Fixed Assets measures how effectively your organization is generating profits from its long-term, supply chain-related capital investments. It focuses on the physical assets—warehouses, trucks, factories, equipment—that enable your end-to-end supply chain operations. By isolating supply chain-generated revenue and comparing it to the cost and value of the associated fixed assets, this metric provides a clear picture of how efficiently your capital is working for you.

Formula:
Return on Supply Chain Fixed Assets = (Supply Chain Revenue – Total Supply Chain Management Cost) / Supply Chain Fixed Assets

Breaking It Down:

1. Supply Chain Revenue: This includes only the income tied directly to the supply chain’s products and services. It excludes non-operational revenue sources (like real estate leases or sales of office buildings) to ensure a pure view of supply chain performance.
2. Total Supply Chain Management Cost (CO.1.1): This figure encompasses all costs related to planning, sourcing, transforming, fulfilling, and returning products. These can include raw materials, manufacturing costs, logistics expenses, and return processing overheads.
3. Supply Chain Fixed Assets: The denominator focuses on the tangible assets used across the supply chain. This includes land, warehouses, machinery, fleets of trucks, distribution centers, and other infrastructure managed by the Manage Supply Chain Assets (sE5) process.

Data Collection Made Simple
One of the advantages of measuring Return on Supply Chain Fixed Assets is that the necessary data typically already exists within enterprise systems such as:

• General Ledger – For overall financial records
• Accounts Receivable/Payable – For accurate revenue and expense management
• Purchasing and Production Systems – For procurement and manufacturing costs
• Customer Relationship Management Systems – For aligning customer demand with revenue

Business rules and transformation logic can be applied to these data sets to yield insightful KPIs tailored to your supply chain.

Why This Metric Matters
Understanding your Return on Supply Chain Fixed Assets helps you:

• Identify Underutilized Assets: Are certain warehouses operating below capacity, or are machinery and equipment not fully exploited?
• Improve Capital Allocation: Insights guide strategic decisions on where to invest next—e.g., expanding a high-performance distribution center or automating a manufacturing line.
• Elevate Profitability: By optimizing fixed assets, you can reduce operational costs and ultimately increase your net income attributable to the supply chain.

Real-World Examples and Strategies for Improvement

1. Amazon’s Regional Fulfillment Optimization:
   Amazon constantly analyzes the performance of its fulfillment centers. By employing control towers (BP.126) and advanced predictive analytics (BP.194), Amazon ensures that each distribution center’s throughput justifies its existence. For example, shifting certain SKUs to a more strategically located center can reduce transportation costs and increase asset utilization. Over time, these strategic moves improve the return on the company’s extensive network of fixed assets—from robotic pickers to high-tech sorting machines.
2. Toyota’s Lean Manufacturing and Asset Efficiency:
   Toyota, a pioneer in Lean practices, takes a deep dive into how each piece of equipment contributes to final output and costs (BP.165 Convergence of SCOR with Lean and Six Sigma). By continuously improving work center load evaluations (BP.091) and applying integrated business planning (BP.183), Toyota ensures maximum productivity from its assembly lines. When machines produce more value with less downtime and fewer defects, the return on those assets improves. Over decades, this approach has helped Toyota maintain profit margins even as global competition intensified.
3. Unilever’s Sustainability-Centric Approach:
   Unilever has focused on improving asset utilization while enhancing sustainability (OE10 Environment, Social, and Governance; BP.288 Life Cycle Assessment; BP.291 Energy Efficiency Management). By retrofitting manufacturing plants with energy-efficient equipment and optimizing the usage of warehouses closer to its key markets, Unilever reduced energy costs and transportation overhead. These changes increased the effective return on fixed assets by reducing the total cost denominator while sustaining or growing supply chain revenue.
4. Siemens’ Smart Factory Investments:
   Siemens leverages smart factory technologies (BP.212 Smart Factory) to better integrate manufacturing processes. By implementing IoT sensors, predictive maintenance, and flexible manufacturing cells, they minimize downtime and ensure that fixed assets—like critical machinery—are always operating at peak efficiency. These innovations lead to improved OEE (Overall Equipment Effectiveness) and higher returns on the company’s capital investments in plant and equipment.

Best Practices to Increase Your Metric Performance

• Implement Integrated Business Planning (IBP):
  Cohesive demand and supply planning (BP.183, P1-P5) ensures that assets are deployed where they add the most value, reducing idle time and excess inventory.
• Use Predictive Analytics for Asset Maintenance:
  Predictive maintenance strategies (BP.194) anticipate machinery failures before they occur. Early intervention reduces downtime, improves throughput, and keeps assets generating revenue.
• Scenario Planning for Asset Investment Decisions:
  Scenario planning (BP.184) helps evaluate the potential return of adding a new warehouse or robotic picking system. By modeling various scenarios, companies avoid over- or under-investment in assets.
• Optimize Your Network Layout:
  Supply Network Planning (BP.086) ensures the right assets are in the right locations. Strategic placement of warehouses and manufacturing plants can reduce transportation costs and improve responsiveness.
• Engage in Total Cost of Ownership Analysis:
  Conducting a Total Cost of Ownership (TCO) analysis (BP.266) reveals the true cost of every asset across its lifecycle. Companies can then reallocate or retire underperforming assets to improve overall returns.

Conclusion
Improving Return on Supply Chain Fixed Assets is more than a financial exercise; it’s about maximizing the strategic value of your physical infrastructure. By carefully measuring this SCOR metric and using proven practices—from Lean and Six Sigma to Control Towers and Smart Factory technologies—your organization can unlock new efficiencies, increase profitability, and strengthen its competitive position.

As the market grows more complex, companies that intelligently manage and optimize their supply chain assets will stand apart. Measuring and improving Return on Supply Chain Fixed Assets is an essential step toward operational excellence and long-term success.