Few people deny that supply chains are tricky places. All of us who dedicate ourselves to the world of logistics verify this in our day to day, and for this reason it is important to ask ourselves about this logistical complexity. For what is this? What are your sources? Is it bad that our supply chain is complex?
The complexity in logistics
To start dealing with the subject, the first thing to do is look for a definition. The data analysis company SimaFore conducted a study on complexity in logistics and described it as follows: “Complexity is the capacity of a system for surprises to happen.” For SimaForce, its two main components are uncertainty (how much the results of the processes can vary) and structures (the complex networks that make up the supply chain and that are often drawn as a map of processes in which they are interrelated). .
This study points to five reasons why supply chains are complicated:
Almost anywhere in the supply chain comes in large numbers. The report cites “the number of suppliers, parts, available inventory levels, assembly line positions, orders received, orders completed, machine utilization rates, etc.”
Both in the nature of the different elements -different types of suppliers both in location, size, typology, etc., or the way orders are entered- and in the variety of processes.
Like any chain, the supply chain implies that what happens in one link affects the whole chain. Sometimes it can be very easy to detect this relationship between events, for example when realizing that reducing the transportation time of a product reduces the total delivery time from when the order is received.
However, often the relationships are not so obvious and that is where the problems begin. Furthermore, we may not be dealing with linear interrelationships, but rather ‘curves’. This is, for example, the case of service levels (the availability of our products), where it is much more expensive to go from a service level of 95% to 100% than to do it from 80% to 90%. This phenomenon is called opacity.
This dynamism is similar to what outside the world of logistics is known as the butterfly effect. According to this theory, small, barely perceptible changes can end up having huge consequences. In the supply chain world, one such example is the bullwhip effect.
The SimaFore study also includes a survey asking about the complexity of logistics. To the question “What do you mean when you talk about complexity in the supply chain?” the most voted response was uncertainty in demand forecasts. Similarly, the two preferred tools to combat complexity were accurate demand forecasting and better communication.
Logistical complexity according to the University of Michigan
APICS -an association dedicated to the study of logistics and supply chain- and the University of Michigan have also wondered about the issue of complexity. For them these are the three main origins of this feature:
Businesses would love to be able to have a unique service or product that satisfies all customers. However, it is in personalization where customers are often conquered, whether they are companies or individuals. Being able to adjust to those desires is not easy and costs can be affected: the number of references grows, inventory and customization needs, the complexity of sourcing materials, sales channels, etc.
Companies need products for different audiences, cultures, and countries once they jump into the global marketplace. In addition, globalization affects not only customers but also the entire chain, which includes suppliers, distribution centers, warehouses, etc. Complicating once again the timing, predictions and uncertainty of the supply chain.
Supply chain trends and internal pressure
The constant evolution of logistics, increasingly accelerated and influenced by technology, also adds difficulty to adequately and efficiently assume all this torrent of news. Whether it is the management of omnichannel or the introduction of the use of Big Data in the company, new trends are potential points of conflict.
In a similar way, sometimes it is self-imposed pressure from within that adds further layers of complexity. It is a phenomenon that sometimes comes from the management positions of the organization, who decide to incorporate new elements -whether technological or of another type- to the organization.
Is complexity bad?
The first meaning of the RAE tells us that complex is something “that is made up of various elements”, which in principle does not seem to have to be negative. However, the second meaning equates the complex to the “complicated, tangled, difficult”. As strange as it may seem, the RAE may be the best thermometer to measure when we are adequately managing the complexity of our supply chain.
It is not necessary to be a large multinational for our logistics to reach appreciable levels of complexity. Portfolios of increasingly extensive products in which only a few references accumulate the majority of sales, recipients who want their products in very different forms, times and places (from the individual who wants a unit to the large distribution that requests a trailer). , the need to know the complete traceability of our shipments and/or the raw materials we need… And so on, an almost infinite etcetera through many departments, organizations and workers.
Therefore, the question is not if your logistics is complex, but if it is more complex than it should be or if it is efficient despite its complexity. Following the indications of the RAE, does your logistics simply have many elements or is it complicated, tangled and difficult?
In the next blog article we will see how to learn to distinguish in which of these two possible cases we find ourselves and what we can do to make our complexity healthy.