Why learn about supply chain management maturity? This maturity level shows to what degree a supply
chain is a cohesive team. Assessing a supply chain’s maturity level will help you add
value because you will see the gaps in the current system. It will also help you notice
when your company is backsliding relative to its former progress or to competing supply chains.
Here we show a five-stage model, although other models exist. In Stage 1, Multiple Dysfunction,
the supply chain reacts inefficiently to issues. In Stage 2, the Semifunctional Enterprise,
the supply chain is still reactive but is becoming more efficient.
In Stage 3, the Integrated Enterprise, the company becomes proactive while staying efficient.
In Stage 4, the Extended Enterprise, a nucleus firm becomes a strategic driver
of its supply chain. In Stage 5, the nucleus firm and others
help the supply chain become more consistent and systematic. Let’s differentiate each stage.
In the Multiple Dysfunction stage, functions like purchasing, sales,
and so on fall in silos that hinder optimization or collaboration.
There is little connectivity between these silos and none with suppliers,
who are mainly transactional. Organizations must react to change because the various stakeholders
cannot plan effectively. Therefore, the supply chain is seen as a cost center.
In the Semifunctional Enterprise, cost-cutting is the focus so the total cost of ownership
may be used in procurement decisions. Route and carrier selection may also help control
transportation cost. Cost improvements are possible because the organization begins
to invest in connectivity technology and equipment automation. However, silos still
make decisions independently so insights in one area may not get leveraged elsewhere.
In the Integrated Enterprise, silo walls come down.
Technical integration comes from an Enterprise Resources Planning system,
while cross-functional business processes like logistics help integrate silos.
For example, warehousing and transportation integrate their decision making. A proactive
focus is seen in less product complexity or use of design for logistics or manufacturability.
Rather than guesswork for inventory and safety stock, these are managed strategically.
While customers and suppliers are not networked, customer segmentation is sophisticated
and some suppliers may provide materials Just-in-Time. Note that the stages so far
are primarily historical, but small or protected organizations may still be in these stages.
In the Extended Enterprise, the nucleus firm treats the supply chain as a strategic driver and
we finally create a modern supply chain because some business processes extend to suppliers
and/or customers. The networks of various supply chain partners form a larger network. The network
integrates demand generation with fulfillment, aligns with strategy,
shares real-time information, and enables collaborative forecasting and replenishment.
In the Orchestrated Supply Chain, we now differentiate between adequate and world-class
supply chains. This stage requires what is called a supply chain digital transformation.
This refers to realizing the benefits of diverse technology and process improvements in the supply
chain. Therefore, this stage is all about finding and addressing gaps so that end-to-end visibility
and process automation can provide real value. A key gap to address is network security.
Another gap is procurement risk. Resilient sourcing is used to address this gap
such as by diversifying to include at least one in-country supplier. In addition
to products being inclusively designed, they also right-size their product variety.
This stage is also about people maturity. Persons at this stage embrace change management,
work well on cross-organizational teams, and use actual data to drive their decisions.
So, what level is my supply chain at? To answer this question you may need to look
not only at one’s own supply chain but also at competing supply chains. Success is relative!
Another nuance is that a supply chain may be more mature in some business areas than in others.
We hope you enjoyed this overview of supply chain maturity levels.