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The Five Stages of Logistics Maturity

From siloed behavior to data-sharing and collaboration across disciplines -- that's the journey that companies are making today, as they pass through the five stages of logistics maturity, according to Greg Aimi, director of supply chain research with Gartner.

The first stage of logistics maturity is achieved by large global companies that are typically divided by businesses, divisions, regions and profit-and-loss statements. Logistics functions reside within each, with little synergy among the parts. Often the result is “individual autonomous groups being driven by priorities of other parts of the company,” says Aimi.

Stage two requires that companies leverage their scale to achieve some level of organizational consistency, even as they continue to be internally focused and serve constituent businesses. Such units tend to focus on cost containment, proficiency and productivity.

Stage three brings together various functions under the classic model of “plan, make, source, deliver.” The organization might make tradeoffs between transportation and inventory holding costs, and there’s some degree of knowledge among the various groups of the larger ramifications of their decisions. The business is still internally focused, however.

Stage four turns around that orientation to begin the planning and execution process with demand, and work backwards from there. At this point, says Aimi, “the value network comes into play.”

The fifth and final stage of logistics maturity is achieved by companies which embrace the notion of the value network, “and try to understand the things I can do to help my suppliers and customers create value.”

Aimi speaks of a governance model that oversees logistics for the entire organization, even though some components continue to reside within the various nodes. Calling on logistics managers from various regions and businesses, a company can begin thinking about problems collectively. Third-party logistics providers are also brought into the fold. “There’s a balance between what you can standardize and what you need to specialize,” says Aimi.

Most companies today are moving from stage one to two, with a road map for reaching stage three. Leading organizations, says Aimi, “are in stage three, with some road map initiatives for four.” But few, if any, have achieved the nirvana of stage five.

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