Note: this is an authors’ version (pre-final review) of the paper Oliveira, MPV, McCormack, K, Trkman, P.

:
Business analytics in supply chains – the contingent effect of business process maturity. Expert Systems with
Applications, 2012, in press.

The draft of the paper is provided for non-commercial use. The final published version as it appears in the
journal (PDF and HTML) will be available on the Elsevier site.

Business analytics in supply chains – the contingent effect of business process maturity
Abstract
The paper analyzes the effect of the use of business analytics on supply chain performance. It
investigates the changing information processing needs at different supply chain process
maturity levels. The effects of analytics in each Supply Chain Operations Reference areas
(Plan, Source, Make and Deliver) are analyzed with various statistical techniques. A
worldwide sample of 788 companies from different industries is used. The results indicate the
changing impact of business analytics use on performance, meaning that companies on
different maturity levels should focus on different areas. The theoretical and practical
implications of these findings are thoroughly discussed.

Keywords: business analytics; supply chain management; process maturity; information

processing capabilities; performance

1 Introduction

Business analytics (“BA”) are becoming an important tool to improve the efficiency,
competitiveness and profitability of businesses. Their positive impact is not self-assured
though thus the center of discussion moved to how to best realize the opportunities of BA
use .
An important area of BA use is in supply chain management (“SCM”) since an improvement
in SCM can considerably improves performance of single companies and supply chain (“SC”)
as a whole . Thus the research of BA use in SCs is growing . It shows that an investment in
BA is likely to improve SC performance and to bring a competitive advantage. Thus several
expert systems for statistical and quantitative analysis for optimization of planning, sourcing,
production and transportation in supply chains were developed .
However the organizational factors that influence the impact of BA on SC performance
remain unclear. Although an investment in BA has been statistically proven to be beneficial ,
it means a considerable undertaking for any organization. Due to the finite nature of their
resources, companies are pressed to prioritize their efforts and identify those areas where
positive effects of the development of BA capabilities are most likely. In this sense, a
company may not be able to make simultaneous efforts in different areas of SCM. Thus it is
needed to investigate which factors influence the magnitude of BA impact on performance.

1
We argue that the effect of BA on performance depends on the supply chain process maturity
of the organization.
Therefore the main contribution of the paper is the analysis of the impact of the use of BA on
performance in companies at different process maturity levels. An analysis of data from 788
companies at different maturity levels is used to show how the SCM areas, where the impact
of BA is the highest, change with the change in process maturity.
The structure of the paper is as follows: firstly, the conceptual research model is explained.
Then the impact of BA on performance is outlined. The role of BA in increasing information
processing capabilities is shown. Process maturity and its influence on the impact of BA is
outlined. Methodology and statistical analyses are presented. The findings are discussed and
illustrated with practical examples.

2. Conceptual research model

The paper argues that the main role of BA is to increase information processing (IP)
capabilities of an organization. However, such an increase per se may not be sufficient. In
order to provide the benefits these increased capabilities need to be a good match the IP needs
of an organization. Since it is likely that different companies have different IP needs it is
important to analyze the potential contingencies that influence their IP needs. This would
enable a more deliberate focus on the increase of IP capabilities in the areas where it is most
likely to lead to the desired benefits.
In order to test that firstly the factors that influence the IP needs have to be identified. Supply
chain process maturity (“SCPM”) has been chosen as a suitable proxy since it has been shown
that SCPM importantly influences the business processes of a company/SC and consequently
its performance . IP needs to be closely connected to business process design to maximize the
payoff by the right choice of action . Further advantages are that maturity model is generic
across manufacturing settings and that improvement occurs in stages hence the notion of
maturity . This gives a chance to compare companies at different maturity levels and from
different industries. In the paper we argue that IP needs are changing with the change of
SCPM. In order to measure the maturity level a comprehensive and empirically validated
maturity framework SCPM3 was chosen. The framework has five maturity levels which are
described in more detail in “Supply chain process maturity” section.
Secondly the decision how to structure the SCM activities is needed to enable the study of the
importance of each area at different maturity levels. Such a division has to be both
theoretically plausible and understandable to practitioners. Therefore the Supply Chain
Operations Reference (“SCOR”) framework was chosen. It divides the SCM activities in the
four main areas: Plan, Source, Make and Deliver (later also Return was added) . It has been
recognized as a systematic approach for identifying, evaluating and monitoring supply chain
performance .
To summarize: we theoretically argue that the maturity is an important factor influencing the
information processing needs of an organization (several such examples are shown in the
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Discussion section). The paper thus attempts to identify those SCOR areas where an
investment in BA is most likely to bring positive results at each of the five maturity levels.
Consequently a roadmap to pinpoint in which areas companies on different levels should
invest can be prepared.
The conceptual research model is shown in figure 1.

Figure 1: Conceptual research model

These connections are thoroughly theoretically grounded in the continuation of the paper. The
constructs in blue/bold are also empirically studied.

2.1. The impact of business analytics on performance

The use of BA can have a profound influence on performance on operational, tactical and
even strategic levels . The professional press has thus quickly touted BA as an approach
adopted by leading companies to achieve faster cycle times, greater flexibility and a higher
“metabolism” for processing information . This applies to SC as well - monitoring and
improving the performance of a SC has namely become an increasingly complex task. A
complex performance management system includes many management processes such as
identifying measures, defining targets, planning, communication, monitoring, reporting and
feedback . Properly implemented and used, BA can increase performance in each of these
processes . The application of BA can maximize the value of the data and use it to improve
processes
However, the positive impact of a BA investment in SCM operations should not be taken for
granted. Despite major investments in SCM in the last decade, businesses are struggling to
achieve a competitive advantage . Although the volume of the information available in data
warehouses is increasing and the functionalities of BA tools are becoming ever more
sophisticated, this does not automatically mean that companies and individuals are able to
derive value from them . Even more so since Elbashir et al. claim there is a complete absence
of a specific and rigorous method to measure the realized business value of BA.

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Therefore, the impacts of expert systems supported by information technology (‘IT’) and the
BA on improving the productivity and success of knowledge work have been mixed. While
some firms have realized gains, many others have found the benefits to be elusive. Companies
differ in terms of performance not only because of their unique SC’s IT and organizational
structure attributes, but also due to how their efforts “fit” the context of the firm .
A compelling and specific vision for how an organization will use information to improve
their performance is needed . This further increases the need to analyze in which area the
impact of BA may be most beneficial. This is especially so because many organizations with
systems already in place to collect data and gather information find themselves in a situation
where they have no roadmaps to put their vast data and information into use . This is even
more important since investments in both IT and BA are likely to be path dependent and a
previous investment can increase the capacity for further change . An improper investment in
an early stage of implementing BA may thus hinder further development. On the other hand,
successful efforts may lead to a long-term continuous increase in performance since the path
dependency and irreversibility in the development make it difficult to imitate .
The impact of BA does not mainly depend on technology or numerical methods. In fact, BA
are more about culture, creativity and people’s view of the value of information rather than
technology . Which business processes to support with BA has to be established and how
added value is to be achieved must be identified . IT and consequently BA need to be
implemented with the intent of maximizing project and financial outcomes in a way that
fundamentally improves the firm’s capabilities which, in turn, will improve project- and firm-
level performance .

2.2. Information processing capabilities and needs

IP is the purposeful generation, aggregation, transformation and dissemination of information
associated with accomplishing some organizational task . The IP view posits that IP
capabilities and IP needs must be aligned; the greater the task uncertainty the greater amount
of information that has to be processed . IP view sees the linkage between a key
organizational resource (information) and its management (i.e., the use of information) as an
organization's most critical performance factor . The company needs to identify those areas in
which an increase in IP needs demands an increase in its IP capabilities . Even the
professional press acknowledges that, when analytical skills are well-matched to knowledge-
intensive work, the business is more productive . Information system professionals need to
work hand-in-hand with business leaders, customers and suppliers to understand the operation
and strategy of their company’s business units sufficiently well .
Yet a high level of IP capabilities is not necessarily positive; a company may experience
subpar results where its information capabilities are high but unbalanced . When IP capacity is
less than what is needed to perform a task, performance standards will not be met. On the
other hand, when the organization possesses more IP capacity than is required, the task will be
accomplished inefficiently .

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In addition, IP needs may change over time and along with organizational development; if the
organization does not consciously match its information requirements/needs and information
capabilities, reduced performance standards will automatically lead to configurations of misfit
. Therefore, a need arises to research the way IP needs are changing in organizations and SCs
in order to develop proper BA capabilities. In this paper we argue that IP needs depend on the
maturity of business processes. Accordingly, a proper focus on developing IP capabilities (in
our case measured by an investment in BA) also depends on IP needs and may vary
considerably for different companies at different maturity levels.

2.3. Business analytics as a tool to increase information processing capabilities

Performance differences between organizations and SCs are related to how people decide and
act ; decision-making thus needs to be properly supported by IT-enabled BA. The use of BA
can be crucial since information technology is ever more important in business processes and
consequently SCM . Managerial interest has been stimulated in part by a growing
commitment at all levels to fact-based SCM, which is very important for the competitiveness
of a firm . A complex interplay of different companies, processes, data etc. needs to be taken
into account. In this sense, many analytical and numerical models have been proposed to
handle SC operational and design issues . However, it is hard to encompass all available data
in decision-making.
This underutilization of data raises the question of how to help decision-makers in
organizations harness the incredible wealth of the data available in SCM software . The ability
to sense and interpret events concerning a changing business environment or customer needs
require an event-driven IT infrastructure for making fast and well-informed decisions and
putting them into action .
After years of significant investments in technological platforms that support business
processes and strengthen the efficiency of their operational structure, most organizations have
reached a point where the use of tools to support the decision-making process at the strategic
level is of the outmost importance . Nevertheless, the most suitable organization and
processes to enable the positive impact of these decision support tools are still to be clearly
identified.
All of this highlights the growing need for and importance of BA as an approach to decision-
making based on facts and analysis rather than on intuition or by following general recipes .
However, since a SCM is a relatively broad term a more structured approach is needed to
systematically evaluate its role. In this paper, the SCOR model is chosen as such a framework
for several reasons. From a process perspective, the SCOR model has been developed to
facilitate the construction of a systematic SC performance measurement and improvement
tool; it has often been recognized as a systematic approach for identifying, evaluating and
monitoring SC performance . Further, the SCOR model provides a common SC framework,
standard terminology, common metrics and best practices ; all these improve the
generalizability of this research’s results.

5
The SCOR model divides the processes in a SC into four main areas Plan, Source, Make and
Deliver (later Return was also added). BA can be used in each of the four SCOR areas, typical
examples include an approach for integrated production-planning in Plan optimal decision
about replenishment quantity and reorder point in Source , integrated optimization model for
production and distribution planning in Make and Deliver and an algorithm for vehicle
routing problem in Deliver .

2.4. Supply chain process maturity

SCPM has been used to measure a company’s potential contingencies. While different
concepts could be used to analyze the changing IP needs and the impact on different
companies, SCPM was deemed to be the most, especially because it is based on SCOR, which
is process-oriented. The concept of process maturity derives from an understanding that
processes have life cycles or developmental stages that can be clearly defined, managed,
measured and controlled over time. In any business process, a higher level of maturity results
in the better control of the results, more accurate forecasting of goals, costs and performance
and greater effectiveness in achieving defined goals . It has been shown that maturity
importantly influences the business processes of a company or an SC and consequently its
performance . Companies with more mature SC practices are reducing costs faster than their
less mature peers and achieving higher profit margins .
The maturity model represents a methodology whose applications are related to definition,
measurement, management and business processes control. A growing number of reports
demonstrates the use of maturity models to analyze activities in SC cycles from planning and
manufacturing to distribution .
For the purpose of this research, the Supply Chain Process Management Maturity Model –
SCPM3 is used to provide the classification of levels and the respective characterization.
Although various stage models may differ in terms of the number of stages and what the
stages are called, they are all similar in that they break down a phenomenon’s evolution into a
series of distinct phases with characteristics associated with each phase .
The SCPM3 model (shown in Figure 2) was chosen since previously developed maturity
models only outline the general path towards achieving greater maturity, whereas SCPM3
provides a clearer identification of important areas on each of the five levels. Further, while
most maturity models (see a review in ) are built on anecdotal evidence or consulting practice
SCPM3 was derived from a statistical analysis. SCPM3 is useful for showing which best
practices are fully matured at each maturity level.

Figure 2: SCPM3 – Supply Chain Process Management Maturity Model

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Source: (Oliveira, et al., 2009)

As illustrated in Figure 2, the model is composed of 13 groups of capabilities hierarchically

interrelated and classified on five levels of maturity. The names of each level were defined
based on a Delphi study involving members of the Global Business Process Management
Team. The following characteristics were identified for each one of the five different maturity
levels.
Level 1 – Foundation – is characterized by building a basic structure, aiming to create a
foundation for the processes to avoid ad hoc procedures and to stabilize and document
processes. Without a clear strategy any attempt to improve SC operations will be localized
and promoted in an ad hoc manner by a few adherents scattered throughout the organization .
At this level, the critical business partners are identified and order management best practices
are implemented. However, the core SC capabilities such as planning, order management,
fulfillment, and procurement are still at relatively low level . Process changes are hard to
implement, there is always a feeling that customers are not satisfied with the company’s
performance and the company does not have adequate control over what has been ordered and
not yet delivered. In a typical manufacturing company at this level no one ever analyzed the
time elapsing from a customer's order to delivery . Processes are not flexible and thus a
company uses many and product/service specifications’ resources to try to meet customers’
changing demand, with these bringing unnecessary expenses. Such rapid process change
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requirements lie beyond the financial capabilities of most companies, which prefer to leave a
well-tested configuration unchanged . Processes are not properly documented; proper
documentation is usually a prerequisite for the adaptability and flexibility of SCs and for an
overall change management process .
At Level 2 – Structure – processes start to be structured in order to be further integrated. Each
process has a clearly defined beginning, an end, clearly identified inputs and outputs, and a
structure for action . Controls are implemented in demand management processes, production
planning and scheduling, and for the distribution network management; all of these constitute
core SC capabilities . Distribution management practices are structured and the processes are
defined. Demand starts to be evaluated in more detail. The future demand for a certain
product is the basis for the respective replenishment systems . Forecasts are frequently
updated and measured for accuracy. The processes of production planning and scheduling are
structured taking the demand management and forecast as inputs; the greater coordination
between manufacturing and marketing also increases the positive impact of adopting
information system . Information system starts to support the operations and integrates with
organizational processes. This enables the use of mathematical and statistical methods for
distribution planning and demand forecasting (see e.g. for an overview of such methods). The
impact of future process changes is evaluated in detail before being implemented.
When organizations reach Level 3 – Vision – the key processes of distribution, planning of
the SC network, demand planning, procurement and operations have formal process owners;
this importantly influences the performance of the SC . The cross-functional teams that
oversee all value-added activities from product conceptualization to customer relationship
management significantly improve governance . Companies positioned at the Vision level
have a formally designated procurement team which meets periodically with other
organizational functions such as marketing and operations. The team needs to communicate
the benefits of efficient procurement .
At Level 4 – Integration – companies seek to build a collaborative environment with their SC
business partners through the sharing of risk and rewards and long-term shared commitment
and goals . The forecasts are developed in detail, considering the demands of each customer
individually, thus enabling the management of a whole supply network. Integrated planning
and a scheduling model encompass the entire SC and support both pull- and push-based
environments . Information about customer planning starts to be considered as an input for the
company’s planning. Forecasts are developed for each customer, individually. Critical
suppliers are seen as partners and have broad access to company’s information about
production; companies work with them much more closely than in traditional contract-based
relationships .The strategic planning team is involved in the process to select new members
and partners for the SC and actively participates in the relationships with suppliers and
customers.
Level 5 – Dynamics – is characterized by the strategic integration of the SC, when processes
support collaborative practices between partners and enable the SC to be responsive to market

8
changes. Companies attend to the short-term demands of customers and act in a responsive
way. The SC starts to behave dynamically, continually improving its processes considering its
key performance indicators and reacting fast to the changes in the competitive environment.
Companies establish a close relationship with customers and have control over demand and
capacity constraints. Buyer-dependence, supplier human asset investments, and trust are all
positively associated with improved SC responsiveness .

2.5. Influence of process maturity on information processing needs

Since companies at different maturity levels may have considerably different needs a further
study of the necessary focus on different maturity levels is needed. There is namely no single
best way of organizing that is effective in all situations and there is no universal set of
choices that is optimal for all businesses . This lack of generalizability precludes
organizations from applying a universal strategy . In our case, there is no optimal strategy for
an investment in BA with universal recommendations that would be valid for all companies.
Further, there is no single organizational model for organizing BA that suits every company .
Therefore, the implication is that when organizations implement systems they must prioritize
the outcome they want to focus on ; in our case, which of the SCOR areas needs to be
improved. Organizations should examine which mechanism offers greater strategic value and
to what extent do IT-enabled business processes affect performance . Within an organization,
both management factors in general, and IT factors more specifically, are expected to
influence the extent to which value is gained from using IT . This holds true both for the in-
house development of BA capabilities and for the external acquisition of technology – the
“fit” is very important in both cases .
First, management is faced with a complex set of operating issues and challenges that often
necessitates the making of trade-offs . This need follows the finding that efforts to improve
business processes, whether system-based (e.g., total quality management) or technology-
based (e.g., automation), must shift their emphasis over time . Obviously, companies have
limited time/resources and a tension arises between quick/efficient decision-making and the
careful analysis of data before decisions are taken. The key to managing this tension is to
spend time understanding the critical issues and indicators surrounding a decision context, and
to really focus on the few ones that make most of the difference ; in our case, the key IP
needs. Both researchers and managers need strong foundational, theory-driven tenets that
offer pathways for improving process management policies and practices . Such foundations
can help managers better understand what really makes the difference and draw an
improvement roadmap optimizing the use of the firm’s resources.
Hence, the successful implementation of BA must focus first on specific business needs .
Although there is wide acceptance of the strategic importance of integrating operations with
suppliers and customers in SCs, many questions remain unanswered about which types of
integration lead to the greatest overall performance improvements .
Since SCPM3, by its nature, is a process-oriented model, information is an important driver
for success. Consequently, it would be reasonable to assume that process maturity in SCs
9
impacts IP needs and consequently the relationship between BA and performance results. This
paper aims to evaluate this relationship using descriptive statistics to illustrate how BA
impacts performance considering the different maturity levels and SCOR process areas of
Plan, Make, Source and Deliver.

3. Methodology

This present study has both a descriptive and exploratory character since it aims to describe
and organize information about the influence of process maturity and BA on SC performance.
The main research questions are whether there is a relationship between process analytics and
performance results and whether the impact of BA in each distinct SCOR area on
performance differs between the five process maturity levels.
Based upon earlier research that gathered global data on SCM maturity , the survey included
questions about the utilization of key decision practices in the supply chain. The survey
questions were developed after a literature review, along with discussions and interviews with
supply chain experts and practitioners. Since the SCOR Model was used as reference to
structure the discussions and interviews, with a preliminary set of questions, experts and
practitioners selected from the Supply Chain Council’s member list were invited to validate it.
This list spanned multiple industries and contained individuals working within the SC
domain.
The survey instrument was developed using a five-point Likert scale measuring the frequency
of practices consisting of: 1 – never, or does not exist; 2 – sometimes; 3 – frequently; 4 –
mostly; and 5 – always or definitely exists. The initial survey was tested within a major
electronic equipment manufacturer and with several SC experts. Based on these tests,
improvements in wording and format were made to the instrument and several items were
eliminated.
For this research, specific measures representing only analytics practices within each SCOR
decision area were identified. Those measures were validated by circulating the list among
SCM experts and asking them to accept or reject the measure as representing a BA practice.
The SC performance construct is a self-assessed performance rating for each of the SCOR
decision areas. The construct is based on perceived performance, as determined by the survey
respondents. It is represented as a single item for each decision area. The specific item
statement on the supply chain performance for each of the SCOR decision areas is: “Overall,
this decision process area performs very well.” The participants were asked to either agree or
disagree with the item statement using a five-point Likert scale (1=strongly disagree;
5=strongly agree).
The maturity construct and measures were based upon earlier research . The measures
evaluated the level of supply chain process maturity based on SCPM3.

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3.1. Sample
This survey used an electronic form in a webpage, the link for which was sent by email and
pre-tested with a small sample of 30 respondents. The sample data were collected from 2002
to 2008 with respondents whose functions are directly related to SCM processes from 788
different companies with headquarters in the USA, Europe, Canada, Brazil and China. The
sample deliberately included companies from different industries since various industry
settings need to be investigated in the context of global supply chains .
The study participants were selected from:
1. The membership list of the Supply Chain Council. The "user" or practitioner portion
of the list was used as the final selection, representing members whose firms supplied
a product, rather than a service, and were thought to be generally representative of SC
practitioners rather than consultants. An email solicitation was sent out, seeking to
recruit participants for a global research project on SC maturity. The responses
represent 39.3% of the sample composition with 310 cases.
2. Companies formally associated with IMAM, which is a recognized logistics education
and consultancy institution in São Paulo, Brazil. The sample composition included:
manufacturing firms; construction firms; retail businesses; graphic industries; mining;
communication and IT providers; gas, water and electricity productive facilities and
distribution services. From a total of 2,500 companies, 534 surveys were received,
thus yielding a response rate of 21.4%. After data preparation, there were 478
respondents representing 60.7% of the total sample.
The respondents came from nine positions (sales, information systems, planning and
scheduling, marketing, manufacturing, engineering, finance, distribution, and purchasing).
Approximately 20% of the respondents work in other positions mainly in new supply chain
oriented jobs such as “Global Supply Chain Manager” or “Supply Chain Team Member”. The
share of senior leaders/executives, managers and consultants/individual contributors is
approximately the same. 49% of the companies came from the manufacturing industry, 18.9%
from logistics and communication services, 7.2% from the food industry, 5.2% from the auto
industry and home utilities and 19.3% from other industries.

3.2. Data analysis

In order to support the analysis, the variables for each construct were aggregated by summing
its scores and computing in new variables. In this sense, for example, all variables for Plan
analytics were computed in a single variable representing the score for analytics in the Plan
area. At the end, five new variables were generated by the sum of the indicators of the
constructs of “Plan Analytics”, “Source Analytics”, “Make Analytics”, “Deliver Analytics”
and Performance considering the sum of the performance scores for the Plan, Source, Make
and Deliver process areas.

Table 1: Descriptive statistics

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 N Min Max Mean Std. Deviation Ref. Mean Cronbach’s Alpha

Performance 788 4 20 12.91 3.12 3.23 0.805

Analytics Score 788 26 115 72.56 17.67 3.15 0.728

Plan Analytics 788 11 55 34.91 9.87 3.17 0.886

Source Analytics 788 4 20 12.26 3.55 3.07 0.795

Make Analytics 788 2 10 6.18 2.26 3.09 0.709

Deliver Analytics 788 6 30 19.20 5.15 3.20 0.788

Maturity Score 788 113 444 295.26 60.38 3.28 -

Table 1 presents descriptive statistics about the latent variables. Ref. Mean was calculated
dividing the mean by the number of questions for each variable. A scales reliability and
internal consistency test for each construct showed that all the Cronbach Alphas were proven
acceptable with values above the cutting value of 0.7.
Then, a Pearson’s correlation test was conducted taking the sum of the business analytics
indicators and the sum of the overall performance in each of the SCOR areas of Plan, Make,
Source and Deliver. Based on the results from the correlation test shown in Table 2, the
correlation was proven to be positive, strong and highly significant.
Table 2: Correlation between Analytics score and performance

Analytics Score

Performance Pearson’s correlation .806

Sig. (2-tailed) .000

N 788

In addition, the sample was divided by considering the companies’ maturity levels based on
the scores obtained when using the SCPM3 classification. After pre-processing the sample,
generating the new variables and identifying the five sets, one for each maturity level, 52
companies were identified as belonging to maturity level 1, 156 to level 2, 206 to level 3, 233
to level 4, and 141 to level 5. For the aims of this research, different, yet complementary,
approaches were adopted and later combined.
Initially, a Pearson’s correlation test was conducted for Analytics Score and Performance for
each sample set, corresponding to the five maturity levels. Based on the results (Table 3)
correlations to overall performance were proven significant just for those companies
belonging to level 3 or above.

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Table 3: Correlations between analytics score and performance at each maturity level

Analytics Analytics Analytics Analytics Analytics

Score Score Score Score Score
Level 1 Level 2 Level 3 Level 4 Level 5

Performance Pearson’s
.252 .119 .144 .231 .359
correlation

Sig. (2-tailed) .071 .138 .038 .000 .000

N 52 156 206 233 141

In order to explore the dataset and extract signs showing the impact of BA on performance at
each maturity level, the first approach took scatter plots drawn with linear trend lines. Scatter
plots can suggest various kinds of correlations between variables. The pattern of dots that
slopes from the lower left to the upper right suggests the existence of a positive correlation
between the variables and vice versa. A line of best fit (alternatively called a “trend line”) can
be drawn in order to better identify the correlation between the variables. This method was
used due to the simplicity and intuitiveness of the analyses, making it easy to use even by
those managers who do not have advanced statistical skills. Based on the analysis of the
scatter plots and the respective trend lines, the score areas that emerge to more expressively
impact on the performance for each maturity level were identified (see Figure 3).

Figure 3: Scatter plots of the relationship between BA in each SCOR area and performance at
each maturity level

13
The trend lines for each SCOR area extracted from the scatter plots reveal distinctive behavior
when comparing the different maturity levels.
Pearson's correlation tests were then conducted in order to measure the impact and direction
of the relationships between BA in each SCOR area and performance at each maturity level.
The results are presented in Table 4.

Table 4: Correlations between BA in each SCOR area and performance at each maturity level

Maturit Plan Source Make

Deliver Analytics
y Level Analytics Analytics Analytics
Pearson’s correlation .192 .276 .287 .023
1 Sig. (2-tailed) .086 .024 .020 .435
N 52 52 52 52
Pearson’s correlation -.023 .069 .003 .216
2 Sig. (2-tailed) .388 .196 .483 .003
N 156 156 156 156
Pearson’s correlation .042 .043 .166 .076
3 Sig. (2-tailed) .272 .270 .009 .138
N 206 206 206 206
4 Pearson’s correlation .017 .273 .196 .147
Sig. (2-tailed) .399 .000 .001 .013

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 Maturit Plan Source Make
Deliver Analytics
y Level Analytics Analytics Analytics
N 233 233 233 233
Pearson’s correlation .076 .446 .243 .128
5 Sig. (2-tailed) .184 .000 .002 .065
N 141 141 141 141

The last step was stepwise regression statistics. The stepwise regression is based on a loop
procedure in which for each step the independent variable not in the equation that has the
smallest probability of F is entered, if that probability is sufficiently small. Variables already
in the regression equation are removed if their probability of F becomes sufficiently large.
The method terminates when no more variables are eligible for either inclusion or removal.
The Overall Performance variable was considered as a dependent variable in the equation and
the BA variables for Plan, Make, Source and Deliver were considered as independents. After
conducting a stepwise regression for each maturity level, the resulting equations were taken
into consideration to identify in which SCOR areas an analytics improvement could be
considered to impact on performance for each maturity level. The results of the stepwise
regression are shown in Table 5, while a summary of the identified impacts with different
methods is presented in Table 6.

Table 5: Regression Table – Stepwise method by maturity level

Maturity Variables Standardized
Level Entered Coefficients Sig.
1 Make Analytics 0.287 0.039
2 Deliver Analytics 0.216 0.007
3 Make Analytics 0.166 0.017
Source Analytics 0.283 0.000
4 Make Analytics 0.189 0.002
Deliver Analytics 0.181 0.004
Source Analytics 0.466 0.000
5
Deliver Analytics 0.180 0.180
Criteria: Probability-of-F-to-enter <= .050, Probability-of-F to-remove >= .100. Dependent Variable =
Performance

15
Table 6: Overview of results

level scatter plot significant multiple regression

correlations1

1 Plan, Source Source, Make; Plan2 Make

2 Plan, Deliver Deliver Deliver

3 Make, Deliver Make Make

4 Source, Make, Source, Make, Source, Make,

Deliver Deliver Deliver

5 Source Source, Make Source, Deliver

At the 0.05 level
2
At the 0.10 level

4. Discussion

An investment in BA may be beneficial for the performance of companies at all maturity

levels as conceptualized in our model. Thus (similarly to the finding in ), a relatively low
level of process maturity does not preclude a company from generating the benefits of BA.
However, the impact at lower levels of maturity is much weaker; further, the area of the BA
impact varies considerably.
Interestingly, the results of the analysis with different approaches see the greatest variations
for companies at level 1. This shows that at a low level of maturity it is hard to predict if BA
will have a positive effect and in which SCOR area the investment would be most beneficial.
Based on our results we can stipulate that companies at low maturity levels may benefit from
an investment into Plan, Source and partly Make. This is understandable since companies at
level 1 have poorly defined (ad hoc) processes and a better approach to and analysis of
planning processes can bring substantial benefits to determine to which areas and when to
dedicate the company's resources. Other processes may also improve through planning since
they have measurable goals.
Further, the development of supplier evaluations in sourcing can bring considerable benefits
in the reduction of lead times, an increase in quality and a decrease in inventory . It is well
known that relatively small investments in supplier evaluation can considerably improve the
quality/lead times/reliability of the supplier and that performance measurement systems
directly affect information sharing, problem solving and the willingness to adapt to changes .
These impacts are closely related to the »order management« component of SCPM3 that is in
use at maturity level 1. Companies are scrambling to ensure the better control of their
processes in order to be able to handle orders from their customers. A typical example of such
a company at a low maturity level is reported in Erjavec et al. . Each order was processed
separately regardless of other orders and this led to inefficient resource planning. The
company did not have exact data about stocks, leading to multiple production orders trying to

16
use the same materials. It had unconnected information systems and was unable to even
calculate the production costs of each product. An improvement in any of these areas would
obviously be beneficial, especially to prepare the basic structure for developing process
capabilities. However, in such cases the effects are sporadic and it is quite possible that the
prepared analyses would be either inaccurate due to missing/wrong data and/or not even used
by decision-makers in the processes.
The companies on level 2 have defined processes and are able to “operate” relatively well and
achieve basic cooperation between different functions in an organization. The BA impact now
partly shifts from Source to Deliver. The main question is whether the company is able to
fulfill the orders of its customers. The supply chain now needs an improvement in the SCPM3
practice “Distribution Network Management” and the use of BA can help achieve this. This
supports the commonly held belief that firms need a strong logistics capability to perform
well in traditional and e-commerce markets . Companies on level 2 may focus on approaches
such as just-in-time and vendor-managed inventories that derive a competitive advantage
from accurate and reliable delivery and from an increase in the flexibility of the distribution
processes. This follows the finding that the process view improves the reliability of delivery .
Further, an investment in Source on level 1 may pay off as supply management (supplier
selection and the reduction of the supplier base) is the core prerequisite of just-in-time and
similar concepts . Suppliers are now performing efficiently (not necessarily successfully, e.g.
companies are probably not cooperating in product development) so a further investment in
BA in Source may have a limited effect. The chart also visually suggests a possible
relationship between performance and BA in Plan, although this could not be confirmed by
the other statistical techniques. We can assert that an investment in BA in Plan still has a
sporadic effect which is contingent on several other variables not included in the model.
A typical example of a company at level 2 is a British pharmaceutical firm which initiated a
national project to implement Collaborative Planning, Forecasting and Replenishment for its
major customers. This included significant analytical models and control systems to improve
the process performance of the finished goods storage and delivery processes such as detailed
forecasting calculations, restocking suggestions and performance dashboards .
The alignment of production and other processes to produce the goods at prices and quality
that customers want is crucial at level 3. Various practices such as make-to-order (instead of
make-to-stock); a rapid response, flexibility, and lean manufacturing are being used. For each
of these practices IP needs are high and improved BA capabilities are thus needed. At level 3,
planning is already integral in different processes. An investment so as to increase IP
capabilities in Plan was important at lower levels where this was the only way to at least
partly align the business functions. At level 3 specific investments in planning might be
unjustified and would lead to analysis-paralysis.
A typical example of such use is Procter and Gamble which used network (manufacturing,
sales and warehousing), inventory and order visibility systems and BA to remove several days

17
in the cycle and gain these days on the shelf, leading to increasing sales, less inventory and
less spoilage .
Companies at level 4 have obviously taken cooperation with their customers and suppliers to
the process level. Companies need to increase their BP maturity to build stronger relationships
with their trading partners through integrating complex and cross-enterprise processes
governed by business logic and rules . Therefore, the shift of the impact on higher levels of
maturity (on both the 4th and 5th levels) back to BA in the Source area is logical. Those
companies that went after »low hanging fruit« on level 1 by investing in supplier evaluation
now take their cooperation with suppliers at the process level and from the supplying of
materials to developing final products or services. The basis of the relationship changes from
the parts to be supplied to the programs to be developed and marketed . The increase in
performance is thus no longer derived from efficient, reliable and high-quality supplies but
from strategic cooperation with suppliers, whereby product development, joint projects or
even the outsourcing of whole business processes take place. Suppliers gradually receive and
share more information and schedules with a focal company and become a co-maker of a
product and not just a supplier .
However, developing and maintaining a successful alliance is a very daunting task and goal
clarification, communication, and performance evaluation is of the outmost importance .
Alliance contracts are namely designed to share risk, facilitate learning and joint decision-
making and the exchange of knowledge . Accordingly, the increase in IP capabilities with BA
in all SCOR areas (except Plan) was proven to positively affect performance.
The impact of BA on level 4 corresponds well with the importance of the »supply network
management« component of SCPM3 at that level. A typical case of the use of BA in supply
network management is a medical devices company which built a network of strategic
suppliers. This included a shared sourcing, production planning, inventory management and
order release system complete with a network analytical model that reduced the network
inventory by 50% and improved delivery performance by 25%. Shared process and quality
key performance indicators were highly visible and viewed as network team goals and
objectives. Suppliers in the network took on the responsibility of managing and replenishing
the work in process inventory and had a detailed, real-time view of manufacturing.
Level 5 demonstrates similar impacts of BA as level 4. What is even more visible is that on
level 5 the increase in performance is no longer derived from efficient, reliable and high-
quality supplies but mainly from strategic partnership/alliances with the use of BA in Source
having an undeniable effect well proven by all statistical techniques. The main role of the
focal company in the SC is thus to select and coordinate partners. Indeed, if such a network
can create a strong identity and coordinating rules, then it will be superior to a firm as an
organizational form . All of this relates to the “collaboratively integrated practices” from
SCPM3.
A typical example of such use of BA is Cisco that needs BA in Source to coordinate a virtual
organization that allows Cisco to concentrate on product innovation while outsourcing other
18
functions. Contract manufacturers are closely integrated into Cisco's order fulfillment
systems. They ship about half of Cisco's orders directly to the end customer or to a distributor
without Cisco ever taking physical possession of the product . One of the main critical success
factors for achieving this is business process improvement, while other CSFs listed in are
also closely related to process maturity.
Cisco is also an excellent example of the failure to properly use BA in Source. To lock in
supplies of scarce components, Cisco ordered large quantities well in advance, based upon
demand projections from the company's sales force. However, many of their forecasts were
artificially inflated, which led to double and triple orders. Cisco's SC system did not show that
the spike in demand for these components actually represented overlapping orders. Because
communication was taking place sequentially from one tier to another, Cisco lacked visibility
to demand information at the component level . The final result of this lack of IP capabilities
was that Cisco had to scrap around USD 2.5 billion of surplus raw materials inventory .
Interestingly, our analysis has also revealed either a limited or even nonexisting effect of the
use of BA in planning at all levels of BP maturity. While this finding may be surprising at
first glance, it is in fact in line with most of the studies in the last two decades which found
inconclusive evidence of the effect of planning on performance. Some found low and others
no significant relationship, while some studies even found small negative effects . Most of
these studies agree that the effect of planning on performance depends on several variables,
mainly strategic orientation, turbulence and a firm’s size. Similarly to Rudd et al. , we could
summarize that it is not about planning but about strategy. Obviously, a company’s strategy
can be better executed with the use of BA in the other three areas of SCOR.

5. Conclusion

The paper’s contribution is that it facilitates a better understanding of the impact of BA on

performance. It provides a preliminary confirmation of the need to change the focus on
different process maturity levels. This shows that simply following the »best practice«
approaches or the well-known cases of other companies may bring little benefit.
Although it is likely that companies in different industries may need quite different focuses,
the results of the analysis of the sample from several different industries/countries reveal a
strong underlying pattern. This pattern was confirmed with the use of different statistical
techniques; the quantitative findings were discussed and illustrated with practical examples of
companies at a certain level.
The paper has several practical implications. It shows companies on different maturity levels
in which areas they should they focus on. It also provides a general roadmap for developing
IP capabilities on different maturity levels. Since validated questionnaires for measuring
SCPM exist , it is relatively easy to establish the current process maturity level and
consequently the proper focus of BA. There may be a smaller impact of implementing BA if
the focus is not in line with the maturity level.

19
The paper has several limitations. The significant correlation between BA and performance
does not necessarily imply a causal relationship or that more investment in that area would
further enhance performance. Most of the explanation in the discussion section is not directly
substantiated by statistical analysis; additional research is needed to justify the proposed
influences.
Further, an important limitation is that the impact of BA on performance does not only
depend on the SCPM but also on other contingent variables, e.g. the strategy, the type of SC,
the industry in question and turbulence in the SC’s environment (see e.g. for an analysis of
the effects of a turbulent environment). Finally, since it is quite possible that the use of BA
does not bring immediate results, the performance should be measured with a time lag.
A longitudinal case study that analyzes a single company at different maturity levels, its
use/impact of BA and the development of IP capabilities would be valuable to further validate
the need for a different focus. Specifically, the way in which companies build their IP
capabilities and whether such a road has specific turning points that importantly influence
further development should be studied.

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