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):

• Warehouse Safety Audit Tool- Beware of Accident and Injuries
• 5S – Kaizen Guide: Organizing the Workplace for Flow
• Materials Management Competencies Assessment
• Best Warehouse Audit Tool to Improve Performance
• Sales and Operations Planning Process – Self-Assessment

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

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