What is your Company’s Logistics Maturity Index?

Companies must evolve and adapt to new realities to continue being competitive. To do this, they must measure their performance constantly and make the necessary adjustments to expedite and optimize their logistics and operations.

The Logistics Maturity Index (LMI) is a model that measures the performance of logistics; it consists of assessing the improvements companies achieve through adjustments and in finding out the actions they need to implement.

The goal of this tool is to offer a detailed description of how the company should evolve at the different levels of maturity. Because this is a tool that promotes sustained and continuous improvement, it brings some benefits, among others:

• Measures how each area contributes to the results of the business.
• Uses individual and global indicators to assess decisions quantitatively.
• Adjusts logistics management continuously according to the strategic goals.
• Promotes the measurement and management of opportunities by finding out inconsistencies, strengths, and weaknesses.
• Boosts collaborative synchrony.
• Improves competitiveness and productivity.

The LMI Model

The Logistics Maturity Index Model is based on five pillars: business model, strategic dimensions, management dimensions, management levels, and synchrony.

The LMI assesses how mature the company’s management is; through the company’s employees, it carries out an evaluation on each of the existing subdimensions of a strategic dimension. In the case of a logistics effort, it would be carried out as follows:

Expressed logically, this would be LMI’s formula:

LMI = f (business model, strategic dimension, management dimension, management level, synchrony)

However, we may adapt the model by adjusting both dimensions and levels, if needed. Likewise, the model may include a simulation of business scenarios in terms of dimensions, levels, and synchronies, as well as improvement initiatives and quantitative and qualitative results.

The levels of scalability in the logistics process management have been defined: from a company with exceptionally low management levels to high management standards. In each of these levels, the model allows us to identify if the company is carrying out any initiative.

Implementing the LMI Model

Errors caused by a low level of logistics maturity result in losses throughout the supply chain: suppliers, distributors, and clients. Therefore, we suggest following these steps to ensure a correct implementation of the LMI Model:

1. Gather information about the company: goals, business models, supply chain, organizational culture, systems, and processes.
2. Set the scope and goals of the measurement.
3. Set up a team (leader and involved parties).
4. Present the model to the team, including goals, steps, deadlines, results, and benefits.
5. Value the importance of the strategic dimensions and subdimensions in terms of results.
6. Value the level of maturity of each subdimension.
7. Consider the level of collaborative synchrony.
8. Analyze the LMI. Findings, inconsistencies, weaknesses, strengths, opportunities, and threats.
9. Present the results, log.

Characteristics of the Levels of Logistics Maturity

Level 4:

• The company’s internal process chain is integrated with those of its suppliers and clients in a collaborative platform.
• The demand forecast considers each client’s requirements and planning.
• Suppliers have access to inventory and production data and to the operational planning.
• The company uses advanced analysis tools and performance indicators to identify solutions.
• The whole supply chain responds fast and in a coordinated manner to demand trends.
• Indicators are also valid for assessing the performance of the business partners.
• The profitability of each client is known.
  

Level 3:

• Shift from silo work approach to a dynamic focus on horizontal interdepartmental processes.
• Management of priorities and coordination of tasks per function: processes consist of representatives of the areas involved (functions) and a “person in charge” (cells).
• Far-reaching management indicators; updated and monitored.
• High-performance culture of collaboration.
  

Level 2:

• Stable processes with flexible methods that enable a proper execution of customers’ orders.
• Ability to deliver orders meeting the agreed terms, together with strategic suppliers.
• Knowledge of the supply chain’s operational capabilities.
• Demand planning process based on statistical methods.
• Information systems per horizontal methods that enable inputting data wile executing.
• Indicators to assess how much of what we planned has been met and the accuracy of the demand forecast.
• Stock levels and deadlines are measured throughout the supply chain to plan and automate supply.

Level 1:

• Frequently miss delivery promise.
• Deliveries offer zero visibility.
• There are no comprehensive measurements of processes.
• Low cooperation between departments.
• There are no adequate methods for planning the demand.
• Emergency purchasing is recurrent as well as overtime in manufacturing, and overstocking.
• Inadequate information systems.

According to the level a company is at, it may start working and acquiring capabilities to consolidate quality processes and endure continuous improvement.

Implementing LMI means breaking management paradigms; nevertheless, it also represents an opportunity to develop competitive advantages. Without question, collaboration within the supply chain suggests an evolution that should not be limited to the use of tools but instead to the ways these tools help meet the strategies.

Solistica is a supply chain expert and our innovative processes and tools guarantee we remain at the highest level of logistics maturity. Furthermore, we work with our partners to help them remain at that level too.