Why Manufacturing Maturity Models Fail Upstream: A System Dynamics Perspective on Bio-industrial Manufacturing Using Causal Loop Diagrams

Abstract

Abstract—Existing digital maturity models assume that organizations progress through sequential stages of capability development. However, this assumption does not adequately explain digital transformation in fragmented upstream bio-industrial supply chains, where logistics, financing, and regulatory constraints shape digital capability. This study investigates why conventional digital maturity models fail to explain persistent low digital maturity among Indonesia’s palm oil, timber, and pulp suppliers. A qualitative system dynamics approach was used to develop a Causal Loop Diagram (CLD) by synthesizing evidence from 55 digital maturity models and contextualizing the model with operational evidence from Indonesian bio-industrial supply chains. The analysis identifies three reinforcing feedback loops driven by logistics inefficiencies, compliance financing, and data monopolization, together with one balancing loop that may accelerate smallholder exclusion under the European Union Deforestation Regulation (EUDR). Based on these findings, four policy leverage points are prioritized, beginning with transport improvement and compliance financing before broader data governance reforms. The study extends digital maturity research by explaining digital capability through interconnected supply chain feedback rather than linear organizational progression and offers practical guidance for upstream digital transformation.

Keywords—DMMs, CLD, System dynamics, Bio-industrial supply chain, EUDR