Supply Chain Maturity Model

The Supply Chain Evolution

4

Value chain

Collaboration

5

Full Network

Connectivity

The Innovators are poking through or jumping over the wall

to III and IV (tomorrows market)

I

Enterprise

Integration

Functional

Process

Intra-

Enterprise

Inter-

Enterprise

External

Total

Business

System

3

Partner

Collaboration

2

Corporate

Excellence

Most are working toward Level II

improvement (todays market)

Logical progression of supply chain efforts; none can be skipped.

Level 1 Functional Process

Focus particularly on sourcing and logistics Bring enterprise integration into focus as organizational goal Overcome resistance for info sharing and best practice integration Significant savings through vendor base rationalization- 1-2% profit Focus on inbound freight, internal material processing and

manufacture, outbound freight, warehousing and delivery mechanisms to support logistics system

1st level focus is on internal processing and outbound freight and later on internal freight.

0.5-1% benefit achieved reduce cost per mile on transportation, reduce warehouse and trasnfer ownership to 3rd party

Level 2- Intra-Enterprise Attain some degree of optimization across

internal processes.

Supply chain infrastructure begins to appear with sourcing and logistics moving to higher level.

Planning is important and order management becomes relevant

Order management system to eliminate errors critical for planning system

S&OP introduced for formal process- analyze customer orders, production process, customer delivery.

Forecast accuracy improves from 40% to 50% in level 2. With key customers involvement and maturing in S&OP, can improve to 60% at level 3.

Inventory management reduction achieved however may come with upstream movement of inventories

Supply chain organization will be established with a designated leader and collaboration with IT emerging and will finally result in alliance between SCO and IT

Corporate Intranet in place, reduced internal resistance to adoption

TMS and WMS systems start appearing with technology enablers

Level 2- Intra-Enterprise

Level 3 Inter-Enterprise Level 1 and 2- Firms internal excellence comfort

zone, reluctant to breakout- focus on cost reduction

Top mgmt. focus to move to level3- collaborative working.

Selective partner system to achieved ASCM- end to end processing view with partner collaboration

Forecasting and planning get further improved with production and delivery capability. APS introduced.

Resistance to handover processing/ sharing vital info. to external organization.

High level of improvements; Savings shared with selected partners.

Significance of distributors to improve supply chain with improved inventory position.

Focus begins to shift now to key customers and analysis of linked process steps continues

Level 3 Inter-Enterprise

Level 4- Partner Collaboration

ASCM efforts are established- Supply chain consistuents share knowledge on extranet and collaboration to increase revenues and better utilize combined assets

Reduction in costs and service improvements.

Metrics focused on customer satisfaction.

Level 5- Full Network Connectivity

Intelligent value network can reach as high as 5-8%.

Linked organization share virtually all data electronically and working collaborative on intelligent systems- still an ideal scenario

Few firms in that sight Technology Intel, Cisco, HP, IBM; Consumer goods- Colgate-Palmolive, P&G, Nike, GE, Toyota.

The Potential Savings and Revenue Enhancements

Projected benefits from Collaborative Initiative implementations

Inventory

reduction

Reduced

logistics

costs

Efficiencies

in direct

spend

Efficiencies

in indirect

spend

Savings

in sales

expenses Savings

in R&D

Total

cost

savings Margin

increase

Sales

increase

Total

benefits

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Percent of

revenue

*Source: CSC projections based on benchmarked performance of comparable solution offerings

The Collaborative Network solution set looks to achieve projected cost savings on the order of

5% of revenues; with total benefits to be obtained at an estimated 7% of revenues

Co

nfi

gu

re

Plan

The process model

for any enterprise

comprises typical

building blocks

1.Manage the

supply chain

2. Manage

products

Plan

Source

MAKE Deliver

Return

Manage

product

portfolio

Design

product

Maintain

processes Change

product

Design

process and

tooling

Process Maturity Managing Supply Chain

Based on SCOR Model: Supply Chain Council

Co

nfi

gu

re p

rod

uc

t

Process Maturity: Managing Supply Chain

Technology Maturity: Managing Supply Chain

Process Maturity: Design Engineering

Process Maturity: Production Engineering