Making Supply Chains Simple – Part 2

Author: Steve Christensen, CEO – North America, b2wise

Have you struggled to optimize your supply chain due to global uncertainties and challenges due to the pandemic?

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. You can read Part 1 - Supply Chains are Not Linear here.


Part 2 - Knowing the Unknowable

In part one of this series, we looked at why supply chains are not linear, but are instead complex systems that can be made simpler by better alignment of your tools and processes.

This week we will look at how you can focus on actual customer demand to synchronize the behavior of your supply chain. 

In your career you have doubtlessly spent days or years engrossed in a forecast.  Either arguing for its consensus, exploring its impenetrable logic or simply reacting to its devastating effects on your service and inventory levels.  The first two immutable laws, that are in fact not immutable, rest solely on the use of a forecast to trigger your supply chains behavior. 

And amongst other reasons that a forecast is wrong is how the two types of systems attempt to predict the future or react to reality.

One example is the Gaussian statistical models that produce the normal bell-shaped distribution curve we learned about in school.  This is also how a Linear System works: the sum of the averages is a predictable model of the system and the tails of the statistical distribution are ignored as anomalies.

Paretian statistical models, the kind used in a Complex System, realize that the tails of the distribution curve are where opportunities hide.  They help identify the few critical points, or leverage, that define the relevant information/connections that predict and manage nonlinear complex systems. 

Synchronization Instead of Optimization

Just as you’ve spent/wasted days/weeks of your career in the frustrating world of a forecast, you might have also invested a lot of time and perhaps even money optimizing your supply chain.  If you thought the math behind a forecast was unknowable; try understanding how optimization math works.  It will make your mind melt.

How you improve a Linear System is completely different than how you improve a Complex System.

A linear system can be optimized.  It is a series of known steps, with a cost/time at each point, and there is ‘math’ that will tell you the optimal stocking policies you’ll need.  Ignore that it is based upon the same forecast we discussed earlier.

A nonlinear system cannot be optimized but it can continually learn and improve.  Your supply chain has been receiving constant improvement in a complex environment even though you didn’t have the tools.  You knew how to get results that were not supported or defined in any of the systems.  That’s what has made you so successful.  Your ability to think and act outside of the system.  A Complex System seeks to remain Synchronized

Conclusion

They told you your supply chain was linear and equipped you with precisely the wrong tools.  Your supply chain is neither a chain nor a linear system.

The 3 Immutable Laws of Supply Chain are not immutable; you have the power to change them. 

First, 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.

Since you can’t predict a Complex System, by focusing on actual customer demand you will Synchronize the behavior of your supply chain.  Service levels will achieve virtually 100% OTIF.  Inventory levels will plummet by 30%.  Planning will become stable for everyone in your supply chain. 

You, and your entire supply chain team and stakeholders, will suddenly reduce their stress.  By a lot.  You and your people may even report, as others have, that they can sleep better at night.

All you have to do is challenge the status quo, explore alternatives that align with the reality of your business and find a space on your desk for some company and industry awards.

Looking to learn more about supply chains and developing a simpler Demand Driven approach? Join us THIS WEEK 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].