October 2008 | Commentary | Supply Chain Perspectives

Diagnosing Complexity

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Complexity can be a concern wherever it arises. More often than not, it is perceived as a burden rather than a virtue.

Simplicity, on the other hand, has shown great value in science and engineering. Yet even in these areas, complexity still persists.

When complexity runs wild it becomes chaos. Some gurus tell us to "embrace chaos," but is it proper to run a business accordingly?

Modern business literature touts innovation as the right hand of a well- managed enterprise. Kill innovation and you kill the business. Complexity and innovation are the razor's edge for an enterprise, and must be approached with care.

Sourcing Complexity

Complexity in the supply chain manifests itself in a number of different ways:

In the design process. Adding more than the usual number of parts or sub-assemblies specified in a product design builds complexity within the supply chain. More parts mean more inventories, and therefore an increase in SKUs. SKU diversity often conflicts with lean manufacturing philosophies. It is hard to operate lean with more of anything.

In the product lifecycle. Managing more parts in design and manufacturing also impacts processes farther along in a product's lifecycle. Returns and recalls add complexities where companies can least tolerate them, creating unwanted transportation and repair costs. When it comes to returns, complexity destroys profitability.

In marketing and distribution. Design, manufacturing, and product lifecycle issues are not the only sources of complexity. Marketing and distribution also can add complexity through too many hauls, too many destinations, or too little economy of means. Customization within the product line and within distribution operations is always more complex and, as a result, more costly.

In global sourcing. Complexity arises when businesses partner with global suppliers. Aside from rising transportation costs, global trade regulations and customs clearance processes increase complexity—more sources, more pain, less gain.

In competition. If a company operates with fewer parts, fewer sources, and a leaner supply chain it may gain a competitive advantage. Judging the complexity of a new product, and the supply chain processes that sustain it, must address the context of the market. A product is not just a thing, however; it is a set of sources, a supply chain, a logistics nightmare, or a logistics opportunity.

Striking a Balance

The opposite of supply chain complexity may be commonality—using as many of the same parts or processes as possible. But that practice can reduce value within a product or process, or reduce value and service to the ultimate consumer.

An attack on complexity runs the risk of injuring innovation, and that can be more lethal than any degree of complexity.

Supply chain complexity is like a log jam that builds one log at a time. It takes a practiced logger, and logistician, with the right insight and experience to know which logs to move first and which ones to leave alone.

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