Making Supply Chains Simple – Part 1

Author: Steve Christensen, CEO – North America, b2wise

Have you wasted time and money producing a forecast or trying to optimize your supply chain?

APICS Milwaukee Chapter is excited to share this 2-part article series from Steve Christensen, CEO for b2wise in North America. Steve is a certified trainer in Demand Driven methodology and he shares his thoughts on making supply chains simple in this 2-part article series.

Part 1 – Supply Chains Are Not Linear

Supply Chains are often described in linear terms.  Step 1, then step 2 and so on.  From vendor to plant to distribution to the customer.  Each of these steps are directly observable, measurable, timed and cost.  Just ask a cost accountant.

You can draw a line through each individual step and stop along the way that your vendors and employees take to create products that fulfill your customer's demand.

Simple.  Right?  No.  It is not that simple. 

Supply chains leaders experience first-hand the seemingly infinite number of things that can, and do, go wrong.  Daily.

Rarely, if ever, is a disruption caused by just one thing. Never does that disruption cause just one more problem.  Consequently, three immutable or unchanging laws of supply chain have evolved over the past 50+ years:

  1. Service levels are always too low,
  2. inventory is always too high and
  3. the forecast is always wrong.

Call ‘Em Like You See ‘Em

You’ve been in supply chain long enough to know just how complex it can be.  There are no simple answers when the problems are complex. 

But, did you know you’ve been using a linear solution, the exact opposite of what you require, to try and solve those complex problems?

To help you see why let’s review the differences between Linear and Complex Systems.

  • Linear systems can be understood by studying the individual part; the whole is the sum of its parts.

  • Complex systems can only be understood by mapping the dependencies and interconnections.

A supply chain is more than simply the sum of its parts.  A supply chain is obviously a complex system based upon the number of vendors, employees, steps, processes, SKU's, locations, and immeasurable variables, like your fickle customers, that impact your business every single day.

If you need proof of the fact that your supply chain isn’t linear; look no further than the results you always deliver that created the 3 immutable laws referenced above.

Your Customer, Vendors and Employees are Nuts: Stable v. Dynamic

Okay, probably not nuts; but certainly not stable.  Stable customers order the exact quantity at the exact time as foretold by your super-smart forecast.  Vendors would never deviate their quantity, quality, or timeliness of deliveries to you.  Employees, and even equipment, would never change their quality or rate/throughput.  Heck, even the weather would cooperate.

We know we don’t live in that world.  So, let’s compare the predictability of linear v. complex systems.

Linear systems can achieve a stable state because they are linear and the sum of their parts.

Complex systems are dynamic and no prediction remains valid for very long; our supply chain experience at a single point in time is the existing tension between the multitude of influencing factors. 

Reference the unstable cast of characters involved in your supply chain for a refresher on why your supply chain is clearly a Complex System.  You also probably just realized the amount of time you’ve spent working with and using forecasts to Predict your stable behavior.  Now your 3 immutable results have a little bit better perspective.  Don’t they?

Pinballs and Teeter Totters

When you solve a problem, you know that a relatively small change can make a huge difference.  That’s because you are operating in a Complex System.  The output of Linear v. Complex systems is like comparing Pinball machines to Teeter Totters.

The output of a linear system is proportional to its inputs.  The harder you pull the lever back and let it spring forward the faster you are going to propel the pinball into play.

The output of nonlinear system is governed by a few critical points – the lever point phenomena.  Thanks to 3rd Century BC scientist Archimedes we have the Law of the Lever.  Here, the longer the lever the lower amount of effort required to lift the same weight.

Therefore, your supply chain is neither a chain nor a linear system and the first step in making your supply chain simpler is to align your tools and process to realize your supply chain is a Complex System.  With the proper perspective and tools you will reverse the first two laws about Service and Inventory by replacing the law that relies upon a forecast.

In part two next week, we will examine how you can know the unknowable since although you can’t predict a complex system, you can focus on actual customer demand to synchronize the behavior of your supply chain. 

Looking to learn more about supply chains and developing a simpler Demand Driven approach? Join us on September 24th for a FREE webinar on the Basics on Demand Driven Adaptive Enterprises. For additional information, contact us via our website at: http://apicsmilw.org or via email at: [email protected].