A Maturity Model for Supply Chain Design

LLamasoft has developed a maturity model related to supply chain design solutions.  As a leading supplier of supply chain design solutions, this is a natural extension for them. Developing a maturity model, however, is not for the faint of heart.

A maturity model involves a structured framework for assisting companies with some aspect of their business operations. Issues are typically analyzed from multiple perspectives. The analysis allows managers to rapidly drill down on the challenges, compare current performance against various benchmarks, identify possible improvement opportunities, determine which opportunities make the best sense, and gain agreement on the best way forward.

I was part of a team that helped develop a supply chain planning maturity model several years ago. My company, ARC Advisory Group, no longer offers this service. But that experience means I know something about this topic. I must say, I’m impressed by what LLamasoft has accomplished in this area.

The thing I like best about their model is that it ties more advanced design behaviors and processes explicitly to the ROI these solutions provide on an annual basis as well as speed to value surrounding new design projects. The model was developed by analyzing the data of 120 of their customers.

Supply Chain Design

LLamasoft’s Design Competency Development Methodology (DECODE)

Their maturity model is also quite detailed. It examines the skills of the people on the team, the process, technology, and strategy associated with supply chain design. In each area they have from 30 to 70 criteria that are examined to help produce a score.

Once a company’s maturity has been scored, the analysis also shows how far it is practical for a company to advance over a three-year period. But achieving those advances requires a plan. What skills and competencies need to be developed, and in what order? Carlos Andrés Valderrama, the Senior Vice President of Global Customer Success at LLamasoft, stated that it is possible to go from a low level of maturity to a very high level within three years.

The two biggest hurdles that limit companies’ ability to advance their maturity more rapidly are organizational setup and monitoring. Organizational setup refers to the metrics companies use to measure the success of their supply chain. For example, a company with silo metrics, will not do as well. For example, if the manufacturing organization only has metrics that relate to manufacturing processes, that company will not advance as quickly as companies with metrics that take a more end-to-end approach to measuring supply chain success. Monitoring refers to a company’s ability to measure the actual ROI associated with each design project.

For several of LLamasoft’s strategic accounts, 25 or so, they are providing this analysis for free. If the customers want LLamasoft to stay engaged and help them achieve their maturity level target, LLamasoft does charge for program management. The customers LLamasoft is currently working with come from the key industries the company services – retail, food & beverage, consumer goods, and third-party logistics – and have the right level of commitment to improving their design capabilities.

For new customers that want both a technology solution and help in developing their maturity, this analysis and program management can be baked into the fees they are paying for the solution.

This service is a form of benign self-interest, not charity. LLamasoft finds that once their customers achieve a certain level of maturity, about a 3.7 on a five-point scale, their customer retention approaches 100 percent. Further, these more mature customers invest more in LLamasoft’s solutions and services.