SIMPLIFICATION
to reduce complexity
Complexity comes in many guises in supply chains. Complexity may be generated by multiple variants of the same product, e.g. different pack sizes, or by each product in a family having greatly different Bills of Material, or by frequent product changes, and so on. Complexity can also be generated through cumbersome processes that involve many different stages and hand-offs.
Simplification is an obvious remedy for complexity but one which may not always be available. However, there will often be opportunities to reduce complexity by questioning the reasons why things are the way they are. For example, is the level of product variety greater than the customer actually requires? Often product proliferation is driven by sales or marketing departments and may not actually achieve additional sales but spread the same total demand over a greater number of stock keeping units (SKUs). The greater the fragmentation of demand the harder it becomes to manage availability in that the variability of demand at the individual item level will tend to be higher.
Simplification can sometimes be achieved through seeking greater commonality of components or sub-assembly across a family of products. For example, in automobile design these days it is increasingly the case that several different models of car are built on the same platform and ‘under the skin’ share common components and sub-assemblies.
Simplification in the goods’s distribution
Size of warehouses
Distribution centers
Facilities strategic partnerships with suppliers of supplies
Distributors
Customers
Creating communication channels for critical information
Operational improvements
Since the supply chain is the logistics business, companies must streamline their supply chains by simplifying:
- Communications between constituents
- Transaction processing
- Decision making
- Technology infrastructures
Simplifying logistics industry supply chains centers on a single premise: The information surrounding in-transit materials and financial management is as valuable as the actual physical goods. Simplification process which convoluted is usually be simplified by implementing the various components of information technology.
Complexity management in the supply chain has to be a careful balance between over-simplification on the one hand and a focus on cost and efficiency on the other. The aim should be to reduce or eliminate any complexity that does not add value to the customer or that does not protect against supply chain risk.
References:
Logistics and Supply Chain Management Fourth Edition 2011 – Martin Christopher
Operation Management -John Naylor
