maturity

Current Evolution of Supply Chain Management

Daniel Dumke — Mon, 02 May 2011 13:17:00 +0000

One very important part of supply chain management research is the historical analysis of supply chain practices and properties over time. Just recently I published an article on the development of supply chain strategies over the course of 20 years.
Today I want to highlight a more short term, nonetheless interesting analysis done using two surveys from 2003 and 2004 on the current state and evolution of supply chain management practices.

Surveys and Foundation

The results of the first survey were published in 2003. The 2004 study was meant as a follow up. Overall 209 participants mainly from North America and Europe from more than 20 different industries took part in the survey.
A major part of the survey consists of rating the performance in different areas of supply chain management (eg. purchasing, transportation, planning, inventory management…) based on a supply chain maturity model (figure 1). The differences between the results were then analyzed.

Figure 1: Supply Chain Maturity Model (Poirier and Quinn, 2004)

Results

There is some identifiable progress between the two years in terms of the maturity level. Figure 2 shows the results of the self assessment for 2004. The authors state that especially the high tech sector and retail show a high percentage of level 4 and 5 companies. Comparing 2003 with 2004 the results suggest a forward movement in all key areas except for the supply chain software and technology bit.

Figure 2: Results Maturity Level in Supply Chain Functions (Poirier and Quinn, 2004)

Another part of the surveys was the strategy development within the companies. The authors conclude that

overall strategy development continues to be a weak spot among the responding companies.

Especially due to a missing link between supply chain and business strategy. In 2004, over half of the companies reported to have no supply chain strategy. Only 25% agreed that their SC strategy is integrated into the business strategy. But still, the strategies are only shared with their entire supply chain by about 15%.
The authors infer that short term cost-reduction efforts still seam to be the major focus of supply chain management. This is also confirmed by a greater focus of the companies towards supply chain initiatives on reducing cost than increasing revenues.

The authors see the following hypothesis confirmed:

Companies and industries will vary widely in terms of their evolution agains the supply chain framework
Impacts of supply chain initiatives will be significant and well-documented, particularly with regard to cost savings and revenue improvements.
Companies will adopt technology solutions before improving their related processes, thereby foreclosing on the technology’s full benefits
Inter-enterprise collaboration will be a mark of the advanced firms
Customers will be the driving force behind many supply chain initiatives

Conclusion

Long term historical supply chain research can be a key in understanding the political drivers behind supply chain development within a company. And of course improving as a result. The research presented here is a good start in this direction but should be supported by a longer term continuity.
To be honest I was surprised that this short term view even spotted significant differences, since reaching another level in this maturity model usually would take more than one year (this then again shines back on the validity of the sample). And sadly I was not able to find a follow up article from one of the last years which repeated the study.

As always with questionnaire based surveys, especially those which have to be filled without guidance by one of the researchers, the results may heavily be biased by the interviewee and his environment.

From the deduction particularly the third hypothesis (“companies will adopt technology before changing processes”) seems to be hard to confirm in a survey alone and the presented evidence looks weaker than the others.

Reference:

Poirier, C.C., & Quinn, F.J. (2004). How are we doing – A Survey of Supply Chain Progress Supply Chain Management Review, 8 (8), 24-31

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empirical research

Effects of Process Maturity and Uncertainty on SC Performance

Daniel Dumke — Mon, 31 Jan 2011 16:16:00 +0000

Process orientation may or may not be a very hip topic right now. Nevertheless effective processes are a foundation for company performance. Lockamy, Childerhouse, Disney, Towill and McCormack (2008), analyze and explain the impact of process maturity and uncertainty on supply chain performance, the full paper can be obtained here free of charge.

In close collaboration with several businesses they conducted an empirical study on this topic, which I present in the following.

Business Process Orientation and Quickscan

Business process orientation can be described using the dimensions process management, process jobs and process view.

Process management & measurement means that the company is using metrics on aspects of the process such as output quality, cycle time, process cost and variability, in contrast to traditional accounting measures.

Process jobs focus on processes as opposed to functions, and are cross-functional in responsibility.

Finally, process view is the cross-functional, horizontal picture of a business involving elements of structure, focus, measurement, ownership and customers.

Relationship between Process Capabilities and Maturity (Lockamy et al., 2008)

The authors used the Quick Scan methodology with over 20 different supply chains. It consists of the following four methods: questionnaire analysis, process mapping, semi-structured interviews, modelling from numerical data.

Each quick scan took about two weeks at the site of the client and resulted in: a current status of the organization and the supply chain, evaluation of the maturity of its practices and processes and its ability to meet current and future customer needs, furthermore details on the management of uncertainty and interfaces beteween these areas.

Supply Chain Maturity and Uncertainty

Supply chain maturity is described here using five cumulative levels:

Ad Hoc, marks an unstructured supply chain with badly defined processes. Typical are no process measures and few “process jobs”.

Defined, stands for a level where processes and the supply chain has been defined. Process performance is measured sometimes.

Linked, describes a level where supply chain management jobs have been established and performance measures are conjointly evaluated with clients and vendors.

Integrated, traditional functions beginn to disappear, supply chain measures and management is embedded into the organization. This leads to reduced SC cost.

Extended, collaboration is routine, competition is based on a multi-firm supply chain.

Supply Chain Management Maturity Model (Lockamy et al., 2008)

Supply chain uncertainty is defined similar to Christopher and Peck (2004) and devided into process, control, supply, demand uncertainty. Based on other empirical study it can be stated that:

Supply chain uncertainty significantly contributes to poor customer service levels, excess inventory, long lead times, increased quality inspections, and bureaucratic decision-making processes.

Results

After collecting all data during the quick scan on the process maturity and experienced supply chain uncertainty levels the author drew the following conclusions:

Reductions in supply chain uncertainty can be achieved by increasing the maturity levels of processes employed within the supply chains

By increasing supply chain maturity levels and by correspondingly reducing uncertainty, firms can improve overall supply chain performance

Levels of maturity in the area of process structure and jobs can significantly reduce the level of control uncertainty within supply chains

Reductions in demand and control uncertainty can be achieved by increasing the maturity levels of process measures utilised within supply chains

Process Maturity vs. Supply Chain Performance (Lockamy et al., 2008)

Conclusion

One would think that better processes lead to better supply chain performance. But it is hard to objectively measure the maturity of a specific process. How do you grade them. For example maybe a process is documented, but to which level of detail and how are current is it? There are processes that work perfectly without having a process chart available which documents the exact interfaces.

So evaluating processes is always an extremely subjective task. I trust the reputation of the participating author that they used all due diligence necessary. Nevertheless it would have been great to see more details on how the evaluation has been conducted.

Reference:

Lockamy, A., Childerhouse, P., Disney, S., Towill, D., & McCormack, K. (2008). The impact of process maturity and uncertainty on supply chain performance: an empirical study International Journal of Manufacturing Technology and Management, 15 (1) DOI: 10.1504/IJMTM.2008.018237

Christopher, M., & Peck, H. (2004). Building the Resilient Supply Chain The International Journal of Logistics Management, 15 (2), 1-14 DOI: 10.1108/09574090410700275

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