Anyone who knows the world of logistics knows how complicated things can get. In addition, the fast-paced world in which we move makes it easier for these difficulties to increase. The debate on the origins and complexity in the supply chain is in full swing and the University of Michigan has published a recent report on the matter.
Origins of complexity in the supply chain
The report points out four sources for this problem: adapting to the needs and desires of the client, the globalization of operations, the complexity of suppliers and the complexity due to the business itself and trends in supply chains.
Accommodate the needs and desires of the client
First of all we find speed. Every day we try to deliver in narrower time ranges, which means more deliveries, more routes and more pressure throughout the process. Another factor is visibility, in which customers, both private and business, are increasingly demanding.
Product specialization and customization also adds another layer of complexity. On the one hand, there are more products and more versions of them. This automatically translates into higher production and storage costs, also complicating the use of economies of scale. All of this also entails an increase in the difficulty of operational processes.
Finally, the study mentions omnichannel. “Consumers want unlimited flexibility in the way they receive goods and services,” he says. The integration of sales, storage, order preparation and reverse logistics systems is a typical complexity of the new omnichannel reality.
Globalization of operations
The University of Michigan differentiates two types in this sense: the variety by location and the complexity of the location.
In the variety by location, the report cites the example of the McDonald’s fast food chain, where it is common to find different types of hamburgers depending on the country we visit. These phenomena force companies to add complexity to their supply chain.
The challenge of reaching new destinations, driven by the ability that the Internet offers companies to sell in all corners of the world, requires “new partners in the supply chain, with the corresponding relationships, contracts and complexity that each of they “.
Again, the report distinguishes here various causes for the increase in complexity in the supply chain.
Becoming a global brand often means getting your merchandise to the entire planet. Which, in turn, is usually accompanied by the need to have local suppliers and avoid supplying the whole world from a single point so that logistics costs do not skyrocket. It is easy to imagine the difficulties that a company can find when it wants to replicate its production processes “at home” in other parts of the world and with different suppliers.
The report also tells us about cultural complexity. Companies that leave their borders have to interact with other ways of doing business, other customs, other ways of perceiving brands, people, or social and business interactions.
The globalization of operations has another consequence that, obvious as it may be, adds complexity to the supply chain: distance. The more kilometers our logistics have to deal with, the more difficult its design, supervision, execution and updating will be.
Trends in business and logistics
In this last section, the University of Michigan emphasizes those general trends in the world of business and the supply chain that tend to increase complexity.
Among those included in the report are the customization of processes, the coexistence of various technologies, the fact that the supply chain increasingly covers more functions and more responsibilities are required of them -far from being limited to delivering on time and properly – and business acquisitions.
“Business acquisitions have reached a point where dozens of ERP systems and different planning systems coexist [in the same company],” explains the study, which quotes one of the interviewees defining this situation as “changing the wheels of a truck driving down the highway while deliveries continue to be made and more merchandise is picked up.”
Soon we will see what solutions the study proposes to alleviate this complexity in the supply chain.