THE VALUE CHAIN
MATURITY MODEL
THE VALUE CHAIN MATURITY MODEL
UNLOCKING SOURCING AND COLLABORATION POTENTIAL ACROSS THE EXTENDED VALUE CHAIN
MOST ORGANISATIONS TODAY ARE UNDER EXTENSIVE MARGIN PRESSURE DRIVEN BY GLOBAL COMPETITION AND EXTERNAL SHOCKS SUCH AS THE COVID-19 PANDEMIC. THE LARGEST MARGIN LEVERAGE FOR ANY BUSINESS EXISTS AT THE GROSS MARGIN LEVEL WITH A BALANCED FOCUS REQUIRED ON BOTH REVENUE AND COST OF SALES AS THE UNDERLYING DRIVERS. THE VALUE CHAIN MATURITY MODEL PROVIDES A PATHWAY AND APPROACH TO IMPROVE THE CAPABILITY OF ORGANISATIONS AND THEIR TRADING PARTNERS TO LEVERAGE THE OPPORTUNITIES WHICH EXIST IN THEIR WIDER VALUE CHAIN.
THE VALUE CHAIN MATURITY MODEL
Each stage in the Value Chain Maturity Model is foundational in nature and provides the platform for the transition to the next stage, with a clear understanding of what it will take organisationally both internally and externally with trading partners. The rewards are truly transformational – with sustainable competitive advantage as the prize.
STAGE 1 | REACTIVE
During this stage, sourcing activities are typically characterised by a decentralised approach to sourcing materials and processed products. In addition, there is no formal value capturing process in place across the organisation and a focus on limiting annual supplier price increases tends to drive interfaces with direct suppliers only.
‘Today, many organisations find themselves at this level of sourcing maturity, limiting the hidden potential for growth and efficiency which may exist between them and their partners in the extended value chain. The Value Chain Maturity Model provides a systematic roadmap to change this.’ – Thinus van Schoor
‘Understanding your current maturity level enables a pragmatic transition upwards along the maturity glide path with exponential benefits accruing.’ – Michael Day
STAGE 2 | FUNCTIONAL FOCUS
During this stage, sourcing activities are typically characterised by a more centralised approach with a focus on coordination of buying activities across the organisation and activities structured along product or raw material groups.
Value extraction is focused on margin optimisation that tends to dominate direct supplier interactions, with target margin outcomes as the main objective. Negotiation and contracting will typically be conducted with a limited fact base and understanding of the supplier network and margin drivers.
‘This is where the majority of organisations find themselves today. The benefits of moving beyond a functional focus outweigh the organisational effort by quite a margin.’ –Thinus van Schoor
STAGE 3 | CROSS-FUNCTIONAL FOCUS
This stage is defined by a common focus, definition and measurement of value across the organisation as well as a common approach to value extraction. Value extraction activities tend to focus on unlocking opportunities such as planning efficiencies in single product supply chains.
‘A major step forward for any business. It’s vital to define value in the same way across the functional silos which exist in any organisation.’ – Thinus van Schoor
STAGE 4 | VALUE CHAIN FOCUS
During this stage, the focus shifts increasingly to gain perspectives and unlock the potential in the extended value chain. It requires a formalised approach to mapping and understanding the extended value chain fact base, inclusive of all inputs to the main logistical supply chain and all secondary markets. This approach results in a holistic understanding of value chain economics and relationships from final product back to source.
Making sense of multidisciplinary data and the ability to process large sets of Big Data are key capabilities required to master value extraction through value chain reengineering. The focus is on redesigning key aspects within the value chain as opposed to cost cutting.
‘You can unlock the hidden potential across the value chain by taking a consumer perspective, building a solid end-to-end fact base and focusing on reengineering as opposed to cost cutting.’ – Thinus van Schoor
STAGE 5 | CONNECTED VALUE CHAIN
During this stage, value extraction efforts are multiplied when partners across the value chain constantly see the same version of the truth and collaborate on opportunities continuously. It requires a collaborative approach made possible by digital transformation and the incentive to share openly between partners within the value chain.
‘When partners across the value chain have visibility of the same fact base and collaborate on an ongoing basis, the results are truly transformational.’ – Thinus van Schoor
