Chartered Institute of Logistics & Transport
UK (July 2006)
A high level of process maturity in global logistics is a must if the sector is to improve its performance.
3PLs can help to get us there, but they too need to change. David Warrilow, Managing Director,Audax,
explains the concept.
What is process maturity, and why is a lack of it damaging to the global logistics sector? Business process
maturity is the application of the state or quality of being fully grown, or developed, to a process within a
business. In global logistics, it can be applied to the processes involved in moving freight from manufacture
in China through the export and import gateways to the final customer.
"In today's global supply-chain, the weakest link is still the logistics operations, because of a
lack of process maturity" argues David Warrilow.
According to Six Sigma, process maturity gives an indication of how close a developing process is to being
complete and capable of continuous improvement through quantitative measure.
The concept of process maturity has been proposed for various management approaches as a way to
evaluate 'the state of being complete, perfect, or ready' and the 'fullness or perfection of growth or
development'1 , 2 used two dimensions - effectiveness and efficiency - to rate the condition or maturity of
For reasons that this paper addresses, the business processes found in global logistics tend to be very
immature.They are hardly off the starting block, yet the sector behaves as if the situation is normal and OK: a
result of muddling through and not knowing any better.
The financial cost of immaturity is immense. Being low in process maturity will not yield the same return
as a high process maturity level. The fallout from immaturity includes higher costs and inefficiencies
resulting from overstaffing, warehouse overcapacity, volatile service levels and underperformance and an
unhealthily high churn rate between customer - for example, a manufacturer of high-tech goods - and 3PL.
The churn rate is a result of the 3PL not meeting the expectations of the customer, despite claiming at
quarterly reviews that its performance is very good.The facts speak otherwise, as might be expected where
process immaturity is common.
Models of maturity
Business process maturity can be divided into
levels, that together make one or more models.
A three-level model may look like this:
- Level one - quality control
- Level two - quality assurance, which includes measures to ensure that quality remains of a
- Level three - improvements
Level three addresses the causes of lack of quality in a process. In this model, many global
logistics processes have yet to get anywhere near stage two.
A five-level model ranges from the very basic level - doing things in an ad hoc way, level one - to the
sophisticated - continuous process improvement, optimised by quantitative feedback, level five. Level three
is where most processes have been defined but are not optimised, through lack of systematic application of
statistical management techniques. In this model, many global logistics processes are stuck at level three or just
below. Here, an organisation may have investigated why it is making mistakes and why inefficiencies are created,
but has been unable or unwilling to move to the next level.
Achieving level five results, a flawless operation, is a rarity indeed in global logistics. However, with the bulk
of the global logistics sector not having a formal quality and measurement-based process in place, maturity is
consequently very low. A walk around an import gateway will amply demonstrate my reasoning. There is
a lack of awareness about the need for quality in the processes taking place and how efficiencies could
Why such a lack of awareness?
Global logistics is a long way behind the sophisticated and highly responsive local logistics operations found in
supermarket chains in the UK. It might be 50 years behind manufacturing in terms of investment, use of
new technology, business processes, quality and attitude to the customer. The Second World War
forced change on manufacturing due to the need to rebuild manufacturing plant; logistics experienced
nothing similar. Things could still get from A to B. They still can; but the various attitudes shaped by that fact
have held back improvements.
Consequently, the sector is held back by
old-fashioned processes that do not focus on quality
and continuous, sustainable improvement. The sector
suffers from too many assumptions and not enough
facts based on measuring what is going on in the
delivery pipeline. If measures were much more
widespread than they are, awareness of the need for
change would drive change.
Currently, a number of major customers of a 3PL are
addressing the measurement and quality of service
issues, due in part from pressure from their 3PL, which
is keen to improve relationships with the customers
(and win and retain more major accounts). However,
some of the customers are driving a programme of
measurement, because they acknowledge that
measurement makes the 3PL more accountable for its
claims about service levels.
The whole delivery pipeline - starting with the export
gateway - needs to be looked at to see where quality
can be introduced, quality assurances given and a
programme of continuous improvement implemented.
The 3PL is ideally placed to take an eagle's-eye view
of the delivery chain and impose order and quality on it.
If it does not, the customer - for example, the
manufacturer of the goods being moved - may
intervene, as is beginning to happen among some of the
biggest manufacturers of computer equipment.
There are opportunities now for the manufacturer to
take management of quality in house and become a
4PL, but even then it will still most likely need to use a
3PL for those parts of the delivery chain where the 3PL
Currently, 3PLs in general face serious challenges over
the high churn rate and how they can add value without
incurring a loss, when costs are often based on shipping
costs and not on the value that the 3PL adds. As has
been described, the high churn rate arises from the
discrepancy in performance figures given at quarterly
review meetings with the client. The 3PL puts its own
'good' service level figures on the table.
The customer knows these do not reflect reality on
the ground and, typically after three years with the same
3PL, will move on, dissatisfied, to another 3PL - where
the chances are the same will happen again. In the
10 years that have passed since globalisation of
manufacturing began to take off, some customers have
been through three 3PLs and have returned to the
original in the hope that it will deliver what it - and the
others - did not previously. This behaviour on the part
of the customer is a result of process immaturity.
"The paperwork says a consignment was delivered; but is that a rigorous enough process
or could a vital part of a consignment been misplaced back at the warehouse?"
The only way to close the performance gap between
3PL and customer, and to build the confidence of the
customer while developing beyond the earliest level of
maturity, is for the 3PL to use objective software-based
measurements throughout the delivery pipeline. These
measurements can end the disconnect between
apparent reality in the 3PL office and the 'real' reality on
The 3PL office reality sees decisions being made by
logic: if this piece of paper says freight x is at location y
on a specific date and time, then it must be. On the
ground the situation may be very different, with part of
freight x missing and none of it at location y. If
measurements were routinely used and triggered by
physical events, the 3PL would know for sure where all
and/or part of the freight was.
The business benefits of that alone could be huge in
terms of not losing immediate business from an
unhappy client. Measurement can build bridges into the
long term, cut costs, reduce delivery times and deliver
wide-ranging improvements in service levels. Continued
use of it can better enable a programme of continuous
improvement to be implemented and therefore be an
enabler for the highest level of maturity to happen.
End of old practices
In an era of explosive growth in global logistics, the onus
is on all parties to see where old practices can be
modernised, business relationships improved and the
bottom line enhanced.The 3PL can play a pivotal role in
this.The sector is booming from the viewpoint of being
busy, but less so from the viewpoint of retaining
customers and improving performance and profitability.
DHL is showing the way in using measurement to
enhance relationships with customers, partly through
improving SLAs. But with many organisations in global
logistics still using outmoded ways of doing business,
process maturity in the industry is a long way off.
In terms of process
maturity, global logistics
is perhaps 50 years
behind manufacturing in
processes and customer
Although the Software Engineering Institute (SEI) at Carnegie Mellon University cautions
against using the following statistics to extrapolate percentages per sector involved in the
adoption of the five-level maturity model, they do cast light on which sectors are the most
enthusiastic about process maturity.
Based on the number of process maturity appraisals submitted to the SEI, the sector
percentage breakdown is:
- Business services: 37.2%
- Manufacturing: 24.9%
- Engineering and management services: 13%
- Public administration: 13%
- Transport, communication and utility: 2%
- Other sectors: 9.9%
Assuming that global logistics falls under transport, it can be seen from this sample that
the sector lags very significantly behind some of its most significant customers - manufacturers.
It can therefore be understood more fully why those customers express so much unhappiness
with the performance of 3PLs.
They are more advanced in process maturity.They use systems more. So consequently
they measure more. 3PLs must emulate them if they want to be equal partners, to be taken
seriously at the quarterly reviews and to reap the other rewards that process maturity
- OUP, Oxford English Dictionary - The Definitive Record of the English Language, Oxford University Press, 2004
- DeTORO, Irving and McCABE,Thomas, 'How to Stay Flexible and Elude Fads', Quality Progress, 1999
- Sources: Carnegie Mellon University www.sei.cmu.edu/appraisal-program/profile/profile.html; Six Sigma
www.isixsigma.com; paper by Jurgens Pieterse, speaker and Executive Director, SystemicLogic, 'Tracking process
About the author
David Warrilow has worked in IT for more than 30 years and has been a director of several software and
consultancy companies.The last 10 years have seen him focusing exclusively on requirements and solutions
for global logistics. He has worked with some of the world's largest companies in developing their
supply-chain programmes. Now resident in the UK, he has lived in the Middle East and travels extensively
around the world in the course of his business. His experience in global logistics has enabled hin to become
a speaker and writer for the logistics and supply-chain press.