Supply chain executives often cite process and product complexity within the supply chain as one of their biggest challenges. Complexity can be a source of competitive advantage when it’s the result of meeting customer demands, but it can also introduce risk and expense for the business. What can supply chain executives do to find the right balance and manage complexity before it becomes overwhelming?
The Supply Chain Management: Beyond the Horizon (BTH) research initiative was created through a partnership between APICS and Michigan State University’s Eli Broad College of Business. The Beyond the Horizon project explores supply chain evolution with a view to future impact on business models and operations management. The latest BTH research report, “Managing the Complexity Paradigm,” identifies sources of complexity, offers frameworks to understand key drivers, and provides potential solutions to consider when managing complicated supply chains.
Approaches to Managing Complexity
Supply chain executives that control the sources of complexity put themselves in a better position to succeed. Some obvious methods of managing complexity are covered in the report – like maintaining healthy relationships with partners and vetting suppliers to ensure they’re the right fit – along with some lesser-known but equally important approaches.
New and emerging technology solutions have the potential to increase efficiency by simplifying the management of complex supply chains. Technology solutions are available to simplify and automate many processes. According to Deloitte, adoption of automating technologies is currently at 35%. It is expected to rise to 74% over the next six to ten years. One example of automation - robotics process automation (RPA) – has the potential to help organizations optimize ongoing activities by improving the communication across digital systems. With RPA, robots can move a product through production and ensure quality, using sensors to test for signs that a product might be defective.
However, it’s important to be thoughtful about selecting and implementing new technology. As BTH researchers caution, adopting technology that isn’t a good fit for business will increase the burden on the systems management team, fail to produce positive results, and drain resources that could be better used elsewhere. Technology can’t solve supply chain complexity alone; supply chain professionals will still need to set up and manage these systems. (APICS certifications are a great way to understand this strategic level of supply chain and enable you, or the teams you manage, to make better decisions for your business.)
Utilizing a flexible workforce can also help manage complexity. Per the report, firms that enacted flextime, contingent labor and part-time staff reported a decrease in complexity. Another workforce-related solution is to develop multi-skilled talent to reduce handoffs that create opportunities for breakdowns to occur. The report recommends using formal training processes that rotate employees through a variety of tasks. This method accomplishes two things: it allows people to learn multiple skill sets, making them more valuable to their organization, and it identifies areas where siloed operations introduce unnecessary complexity.
Where, then, does all this complexity come from? BTH researchers identified four primary sources: customer accommodation, operational globalization, supplier complexity and general business and supply chain trends. All businesses need to be customer-focused to succeed, so let’s focus on the first of these sources.
Customers often make requests that add complexity to the supply chain process. Increasingly fast delivery demands are a common strain on supply chains. Customers also expect more visibility (where are the components from? When exactly will it arrive?) in procurement and fulfillment processes, making near real-time shipment and delivery updates a standard practice. Combine the need for speed and visibility with customers’ additional demands for a wide selection of available-to-ship inventory or customizable products, and complexity can reach near-unmanageable levels.
Customer-driven omni-channel flexibility is another complexity creator. Omni-channel experience expectations are reverberating through the end-to-end supply chain from the suppliers’ suppliers to the customers’ customers. Layer onto this some remanufacturing, retrofitting, refurbishing, recycling and sustainability practices to meet escalating social responsibility measures and business as usual ceases to exist.
Customer accommodation is just one of four key areas where businesses can work to reduce complexity. Narrowing the range of products offered or markets served can diminish complexity, but in a competitive global marketplace it can also hurt sales. Finding the right balance and maintaining a manageable level of complexity in your organization is key. It’s also clear that navigating supply chain complexity will require a strategic management plan to prevent drowning in compounding complexity.