Understanding the Importance of Cycle Time in SCOR
In supply chain performance measurement the SCOR level 1 metrics are your starting point. They show the health of your supply chain. One of the key 8 level 1 metrics is order cycle cycle time. Cycle time as a broader concept is one of the most critical metrics, particularly when evaluated from the customer perspective. In the SCOR (Supply Chain Operations Reference) model, cycle time is primarily captured under the Level 1 metric RS.1.1 Customer Order Fulfillment Cycle Time, which measures the average actual cycle time from order receipt to customer acceptance.
Definition and Calculation
Customer Order Fulfillment Cycle Time is calculated as: Measured in days, this metric reflects the responsiveness of an organization, distinguishing between the time when actual fulfillment occurs versus dwell time caused by advance orders placed by customers.
Level 2 Cycle Time Diagnostics
To break down cycle time further, SCOR introduces Level 2 diagnostics, which help organizations pinpoint where inefficiencies or bottlenecks exist. These include:
- RS.2.1 Order Cycle Time
- RS.2.2 Source Cycle Time
- RS.2.3 Transform Cycle Time
- RS.2.4 Fulfill Cycle Time
- RS.2.5 Return Cycle Time
Each of these contributes to the overall customer order fulfillment cycle and can be optimized through process improvements.
Why does Cycle Time Matter?
The longer it takes us to do something, the greater the risk of cost and need for inventory. In its clearest form, the leanest thing to do is only act when you know what a customer wants, and only produce that immediately. Complex supply chain’s don’t work to these timelines, it would be great if they did. We might hold stock of finished goods to give customers short lead times but potentially we hold too much because our sourcing or transformation cycle times are long.. which exposes a company to risk. The risk you produce and buy stock, holding it in warehouses but either customers don’t want exactly what you have, it expires before sale, or you have to sell it off cheaper. All of this erodes profit. So reducing the cycle times is the single biggest thing you can do to improve overall performance. If you could improve planning by 50% or reduce lead times by 50%.. you would take the lead time reduction all day every day!
Reducing Lead Times with Demand Driven MRP (DDMRP)
One of the key insights companies gain when implementing concepts like Demand Driven MRP (DDMRP) is that lead times get reduced significantly. This is primarily achieved through the strategic positioning of decoupling points and the concept of decoupled lead time.
Decoupling Points and Their Strategic Positioning
Decoupling points refer to inventory locations strategically positioned within the supply chain to buffer against variability and demand fluctuations. By positioning these buffers at key points, companies can:
- Reduce the dependency on long lead times from upstream suppliers
- Ensure smoother material flow across sourcing, transformation, and fulfillment processes
- Enhance responsiveness by maintaining stock where it is most needed
Decoupled Lead Time: A New Perspective on Responsiveness
Traditional MRP systems often measure lead time based on cumulative manufacturing and transit times, resulting in excessive inventory or long response cycles. Decoupled lead time (DLT) in DDMRP, however, focuses only on the portion of lead time that cannot be buffered. This allows organizations to:
- Maintain inventory only where necessary
- Enable faster order response times
- Reduce overall cycle times while keeping service levels high
Conclusion: Aligning SCOR with DDMRP for Improved Cycle Times
By leveraging the SCOR model’s cycle time diagnostics and integrating Demand Driven MRP principles, companies can significantly improve supply chain responsiveness.
Key takeaways include:
- Understanding cycle time through SCOR Level 1 & 2 metrics to diagnose bottlenecks.
- Strategic positioning of decoupling points to mitigate variability and dependency on long lead times.
- Applying decoupled lead time principles to shift focus from traditional lead time calculations to a flow-driven approach.
For organizations looking to enhance their supply chain performance, combining SCOR-based diagnostics with Demand Driven MRP principles offers a proven pathway to reducing cycle times and improving overall efficiency.
