A supply chain transforms raw materials into products that are sold to customers through a distribution system consisting of wholesalers and retailers. According to consultant Kevin McCormack and Samford University professor Archie Lockamy III, maturity is the extent to which a process is "defined, managed, measured and controlled." A higher level of maturity implies control, predictability and effectiveness. The five stages of supply-chain maturity are ad hoc, defined, linked, integrated and extended.
Start-ups and newer businesses are usually in the ad hoc stage of supply-chain maturity, where management practices are unstructured and measurement processes are not in place. Supply chain performance is unpredictable, which makes it difficult to set and meet performance targets. Management costs are high because of poorly defined processes and lack of integration, which also leads to low customer satisfaction levels.
In the defined stage, supply chain management processes are more structured and documented. The performance is more predictable, which makes planning somewhat easier. Management costs continue to be high because integration remains poor. Competing goals among supply chain members makes cooperation difficult. Customer satisfaction is improved but still weak. Companies that have started to build supply chain relationships after being in business for a few years are usually in the defined stage of supply-chain maturity.
As companies mature and establish stronger relationships with their supply chain partners, there is more cooperation, and the “functional silos” of earlier stages start to break down. The linked stage, according to McCormack and Lockamy, represents the breakthrough level for a business. Supply chain management is strategic, with clearly defined structures and roles. Performance is more predictable and measurable, which allows management to set targets and improve processes. Customer satisfaction improves in the linked stage.
The supply chain is integrated in the integrated stage. Procedures are well-defined in the entire supply chain. Measurement and management systems are more comprehensive, including advanced forecasting and production planning. Performance targets and process improvement goals are set and achieved, which reduces supply chain management costs and improves customer satisfaction. Established companies with long-term supplier and customer relationships are generally in the integrated stage of supply-chain maturity.
The extended stage involves multi-firm supply chains competing with one another. For example, retailers Wal-Mart and Sears are at the center of extended supply chains, with multiple firms working together in a customer-focused manner. Collaboration, trust and mutual dependency hold extended supply chains together, according to McCormack and Lockamy. Firms often make process improvement investments jointly, which makes the supply chain reliable and efficient.