Supply Chain Maturity Model – Basics You Must Know

There are quite a few supply chain maturity models. These models attempt to drive best practices in Supply Chain Management.  One basic idea behind the supply chain maturity model is that increased supply chain maturity will lead to improved supply chain performance, which in turn will lead to improved financial performance. But we all know the reality of supply chain is not as simple directly proportional relationship and there is little empirical evidence about the relationship between Supply Chain Maturity and financial performance.

 

As we all know, Supply Chain Management is a complex task. It is regarded as the management of all links (purchasing, supply, transportation, loading and unloading, etc.) constituting the supply logistics chain. The goal of supply chain management is to optimize supply tools and methods to minimize delivery time, improve delivery reliability reduce inventory and thus reduce costs. Once the optimization is successful, we become able to talk about a real-time work organization with no inventory.

 

The performance of a business supply network is critical to its success and the development of a mature supply chain approach (increasing visibility): Mostly, business control is based on its supply chain network, which also affects its way of competing in the domestic and global markets.

 

Key logistics trends constitute control over the company’s entire operations, chain store participants, and decisions that have brought huge benefits. In this case, the development of logistics plays an important role in enhancing competitiveness and building partnerships, and it also helps to achieve significant cost savings.

According to the Global Supply Chain Forum, the SCM (Supply Chain Management) is

“the integration of key business processes from end user through original suppliers that provide products, services and information that adds value for the customer and other stakeholders.”

The use of the supply chain maturity model points to advanced and robust processes. It measures the maturity of suppliers that are valuable to organizational leadership and frameworks. The supply chain maturity model can be used to evaluate the current business situation based on key competitive factors and to set goals.

The mature concepts in supply chain networks come from the understanding of network life cycles, which are subject to visible control, definition, measurement and management throughout the process. High maturity means better control of output, cost increase and target forecasting, including the overall performance of achieving established targets.

With the help of the supply chain maturity model, companies can better satisfy and respond to changes in the supply chain environment.

Identifying Business Critical Processes

In order to improve all business processes, organizations need to spend a lot of money, energy and time. Therefore, it is more reasonable for them to chose to prioritize business processes and gradually increase business maturity. Critical business processes (both centralize or decentralized) are the ones with a greater impact on the overall maturity of the organization. The key business process can be achieved through the following steps:

  • Analyze the areas affected by the organization (Quality, timely delivery, compliance (regulations/statutory/certification), cost).
  • Rate scales and weigh scales.
  • Evaluate all high-impact processes (The total critical value is obtained by summing the levels of the process).
  • Determine the critical value and rank the processes.

 

Supply Chain Management Maturity and Performance

The Concept of Process Maturity

“We are what we repeatedly do. Excellence, then, is not an act, but habit.”

– Aristotle, 4th Century BC Greek Philosopher

The maturity of the process indicates how close the development process is to completion, and can be continuously improved through qualitative measurement. Therefore, in order to make a process mature, it must have complete practicality, automation, reliable information and continuous improvement capabilities.

The maturity of SCM is derived from the understanding that the process has a life cycle or clearly defined stages that can be measured and controlled.

The business process orientation model indicates the five stages of process maturity. Achieving each maturity level will establish higher levels of process capabilities (predictability, control, effectiveness, and efficiency).

Keeping that in mind SCMDOJO has established below-mentioned Self-Assessment Tools to measure maturity levels in Materials Management, Warehousing and S&OP (Sales and Operations Planning):

The Capability Maturity Model developed by the School of Software Engineering at Carnegie Mellon University for the software engineering process is one of the most famous maturity models used in industries. The Lean Aerospace Program has developed a lean enterprise transformation maturity model to guide the aerospace industry to lean.

Although the maturity model isn’t directly derived from the supply chain process, it can be used to analyze supply chain activities based on key performance indicators.

Figure 1: Process Maturity Development Stages

Source: McCormack et al. (2008)

In order to understand the scale of performance we are in, it is essential to use KPIs (Key Performance Indicators), OKRs (Objectives and Key Results) or other goal-driven indicators.

  • Level 1 Ad hoc : At this level, processes are usually undocumented and in a state of changes. Order, time and results are different in the repetition process and require supervision.
  • Level 2 Repeatable : The process is repeatable; there is no strict process specification without any product owner definition.
  • Level 3 Controlled : Define, record, establish and implement standard specifications; improve over time.
  • Level 4 Managed : Management uses process metrics and control methods to align the process with business goals and customer needs.
  • Level 5 Optimised : The focus of the process is to improve through innovative changes.

 

The Supply Chain Maturity Model

 

Developing a Maturity Model for Supply Chain Management

 

There are multiple maturity models (from literature and research) that measure the maturity of different fields. A supply chain maturity model (developed by DRK Research and Consulting LLC) uses a foundation based on the concept of business process orientation.

The maturity grid developed by Philip Crosby defines these concepts, emphasizing the 5 stages that companies should follow when adopting quality practices. The created supply chain maturity model allows the model to quantitatively identify its position within the maturity framework. The model puts more emphasis on the following five KPAs (Key Performance Areas), which are the operational elements in the supply chain management maturity model:

  • Plan
  • Source
  • Make
  • Deliver
  • Return

Supply Chain Management maturity model

Figure 2 : The Supply Chain Management maturity model view

Source : McCormack et al. (2003)

The introduced supply chain maturity model allows companies to quantitatively determine their position within the framework of maturity and industry benchmark best practices. The model focuses on five KPAs (Key Performance Areas): planning, source, manufacturing, delivery and return. The figure shows the process maturity view related to the “Supply Chain Operations Reference” model.

This model applies the capability assessment phase to its various processes. The Supply Chain Operations Reference Model defines classifies it as a “overall” SCM practice to manage its strategy and link processes together. The maturity stage is created through a qualitative assessment, which may involve several issues and describe supply chain practices in key areas.

Newsletter signup

Please wait...

Thank you for sign up!

Other Operational Elements in the Supply Chain Management maturity model

 

Stages of Supply Chain process maturity

Figure 3: Stages of Supply Chain Process Maturity

Source: PRTM Management Consultants (2005)

 

In order to develop a supply chain maturity model, the performance evaluation team and PRTM management consultants combined knowledge areas and benchmarking experience. The model is adopted to evaluate the capability stage of each of the 4 processes defined by the supply chain operation reference model (plan, source, manufacturing, and delivery), as well as the capability stage process for evaluating control strategies and linked “overall” SCM practices Together. This maturity model can be useful to companies in terms of breaking their existing supply chain practices to achieve maturity and allow companies to focus on key processes that can increase overall maturity.

For example, concerning the planning category, we must develop a planning strategy, provide for demand planning, supply planning, but also think about investing in the demand / supply balancing and decision making phase. My course S&OP Course- Learn Why S&OP, 5 Step Process, Benefits & Barriers”, will be of good help.

Stages of Supply Chain Management Maturity

 

The concept of maturity model was first proposed by Watts Humphrey of Carnegie Mellon University in 1987. Its goal is to improve the performance of the software development process. Since then, many disciplines have adopted maturity models. In fact, we can distinguish five types of maturity models.

1.      Process Maturity Model

There are many supply chain maturity models produced by consulting companies or independent research companies. In fact, the most widely known maturity model is the work named by McCormack and Lockamy III in 2004 as “Developing Supply Chain Management Process Maturity Models Using Business Process Oriented Concepts”.

2.      Procurement Maturity Model

There are many procurement professionals who can’t really get rid of the concept of “buy the cheapest thing”. We can do many things to help the company create value strategically.

3.      NPD Maturity Model

Modern supply chain strategies go far beyond the scope of “reducing costs” or “improving customer service.” Many supply chain professionals are involved in income-generating projects, such as new product development “NPD”.

4.      Lean Maturity Model

Every supply chain requires lean capability. The Lean Maturity Model provides a broad overview of lean implementation. Consequently, the manager will need to determine which practices can be applied in the industry and how to achieve higher adoption rates.

5.      S&OP Maturity Model

Today’s final S&OP maturity model is the work of Larry Lapide of MIT. Since its establishment in the 1980s, S&OP has been widely implemented, but many companies still choose to incorporate some practices of S&OP into operations review meetings. Along the same lines SCMDOJO has developed Sales and Operations Planning Process – Self-Assessment

How to Run a S&OP Process – Benefits, Process Steps & Barriers

Stages of SCM Maturity

 

Figure 4 : Stages of SCM Maturity

Source : Ayers (2004)

The table highlights several missions assigned to the SCM. Whether it concerns the operations of setting up a Strategic Supply Chain planning projects, or the internal collaborative relationships projects, forging supply chain partnerships projects, managing supply chain information projects or even making money from supply chain projects.

Therefore, we are able to distinguish between 5 categories of stages.

In order to illustrate this, we can take the example of the first category: By approaching Strategic Supply Chain planning projects, there is no strategy to guide the supply chain design.

 

Conclusion

As a conclusion, it must be recognized that the existence of some limitations of business process maturity models could not be unnoticed.

We could speak about the lack of studies and theoretical base or of the neglect of certain crucial elements such as the human, cultural, organizational factor, and others. Another limitation could be the use of a confusing way of measuring maturity or even the fact that one lacks training and experience.

Thus, the maturity model is a way to ensure the security of the supply chain knowing that the concept of process maturity comes from the understanding that the process has a life cycle/development stage that can be clearly defined and managed throughout the entire time.

In any business, a higher level of maturity can take advantage of many ways:

“Predict goals, costs and performance more accurately, provide better control of results and reach established goals and has the management ability to propose new and higher performance goals”.

As global demand for products increases and deadlines for such orders decrease, companies are facing greater pressure than ever before, and they need to establish fast, productive and efficient supply chains. By using technology and information strategically, companies can use supply chain maturity models to gain a beneficial and secure market position and position.

Newsletter signup

Please wait...

Thank you for sign up!

References

Petri Helo, (2009), Developing a maturity model for Supply Chain Management. international Journal of Logistics Systems and Management, University of Vaasa.

Lennart Söderberg, Lars Bengtsson, (2010), Supply chain management maturity and performance in SMEs. Operations Management Research volume 3, pages90–97(2010)

Ayers, J.B. (2004), Supply Chain Project Management: A Structured Collaborative and Measurable Approach, CRC Press, Boca Raton, LLC

PRTM Management Consultants (2005), Supply Chain Management Maturity Model: Understand the Transformation Required to Move from a Functionally Focused Supply Chain to Cross-enterprise Collaboration, http://www.prtm.com/services/supply_chain_maturity_

model.asp (downloaded in June 2007).

McCormack, K.P., William, C.J. and William T.W. (2003), Supply Chain Networks and Business Process Orientation: Advanced Strategies and Best Practices, CRC Press, Boca Raton, LLC.

 

 


Dr. Muddassir Ahmed
Summary
Supply Chain Maturity Model – Basics You Must Know
Article Name
Supply Chain Maturity Model – Basics You Must Know
Description
This blog share basic research on Supply Chain Maturity Model, to help predict goals & performance accurately for better control of results.
Author
Publisher Name
SCMDOJO
Publisher Logo