It’s easy to say, “Reduce your product portfolio and you will reduce your supply chain complexity.” In reality, that is simply not true.
Real world dynamics don’t truly support conceptual ideas of “less is more.” Companies are driven to increase profits, and new products help drive demand, which brings more sales. That scenario is not likely to change any time soon.
However, it’s just not companies that help to perpetuate complexity. Customers expect more customized products and want them delivered through many more channels.
So how does a company work within those parameters and manage their complexity in a way that optimizes efficiency, generates profits and reduce cost?
A new whitepaper from APICS and Michigan State University, Managing the Complexity Paradigm, has some suggestions. Based on APICS and MSU’s Beyond the Horizon research, the four main sources of supply chain complexity can be boiled down to:
- Customer accommodation: Customers demand and expect new products, and want increased speed and visibility of process and supply chain management capabilities.
- Operations globalization: Supply chain expansion into new and diverse global customer markets requires significant variations in existing supply chain processes.
- Supplier complexity: Globalization also brings with it the need to develop and maintain strategies that move beyond local sourcing.
- General business and supply chain trends: The need for omnichannel supply chains puts more pressure on day-to-day business concerns, such as, process optimization, technology turnover, supply chain scope and company mergers.
Since reducing products and markets is not likely to happen, companies are creating ways to work within the complexity, the report noted.
Avoid and preemptively mitigate complexity, for instance, was the leading strategy reported to reduce complexity. Companies are also looking for a deeper understanding of value propositions, and are digger deeper into the application of collaborative partnerships, information technology, and more flexible operations and workforce, according to the report.
The argument goes that if you can reduce process exceptions, firms can achieve better performance.
However, the problem with complexity, beyond what APICs and MSU point out in their paper, is that when companies more or less have figured their approach for managing complexity, the world changes and requires a strategy tweak or overhaul.
Just look at what is happening in the world today. Politics is swinging towards more nationalistic development and shifting away from globalization. This, in turn, could have a notable long-term impact on laws and regulations that dictate customs clearance, and it may reshape interactions with suppliers and customers.
What has your company done to managing the complexity paradigm? What is your main cause of complexity, and how are you dealing with it?