Friday, 28 March 2014

What are Supply Chain Complexities?

supply chainThere are common causes and sources where a complexity in the supply chain can occur. These include the following:

  • Network Complexity
    When you have a network full of links and nodes the network instantly becomes more complex. Therefore outsourcing is rising in popularity to take the pressure of and putting it on expert suppliers of the goods and services required. Extended networks can result in unexpected distributions if the outsources are also dependant on external suppliers.
  • Process Complexity
    Poorly designed processes with multiple steps increase complexity of the supply chain. Any lengthy processes increase the lead time and they can result in an inconsistency in performance.  Process structure needs to be reviewed and planned frequently to reduce the complexity caused by the processes.
  • Range Complexity
    Businesses often find their range of services or products increase over time. Therefore the new products, variants or new services of the brand will have an impact on the forecast accuracy. Often as more va riants are introduced the demand for each different type of variant falls, which then needs to be managed.
  • Product Complexity
    The supply chain can be affected by the design of the products. The choice of materials, life cycle costs and agility all have to be thought out on the drawing board. Logistics must be introduced early into the design process to avoid subsequent complexities.
  • Customer Complexity
    Adding lots of customisable options, or nonstandard services, results in the customer complexity increasing. The costs involved vary and the customers come with different characteristics; ordering different sizes, materials, patterns etc.  The real costs involved in serving customers must be fully understood to increase the profits from these services.
  • Supplier Complexity
    Being collaborative with suppliers is essential. When you work with key suppliers the size of their company must be taken into consideration. The supplier base can increase total transaction costs and the number of relationships that need to be maintained. Finding balance between too few and too many suppliers is key.
  • Organisational Complexity
    It’s a mistake to focus on efficiency without taking into consideration customer satisfaction. Too many hierarchical structures are a common cause of complexity and the different departments lose focus on the main aim of the business. Changing the vertical organisation to a horizontal one improves speed, reliability and builds better teams all working with the end goal in mind.
  • Information Complexity
    Information needs to flow between all the levels of a business, from one end to another. The amount of data flowing can be huge and as a result it’s not always accurate or fully interpreted correctly. Visibility across all levels helps to reduce the information complexity and avoids problems with obscured data, modifications and errors being made along the way.

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