Supply chain complexity


My interest and that of my colleagues at Ontonix is “the mastery of complexity”. But it can be a difficult message to communicate to business leaders for whom the term complexity either means very little or sounds vaguely like something made up by the type of Consultants who will invent new (and scarier) threats to business just to keep them in the style to which they have become accustomed!

So, it is reassuring and extremely useful when experts from business and/or Academia use their significant influence to warn of the, very real, dangers. In his article, Supply chain futures: the mastery of complexity, Philip Greening does us – as providers of unique Complex Systems Management, Business Risk Management & Quantitative Complexity Management IT solutions – and members of the Supply Chain community an enormous favour.

Of course the need to: map; measure; manage; monitor complexity within Supply Chains – that are, more accurately, Global Supply Networks – is not just an issue for the active participants or their customers.

At any given time INSURERS, REINSURERS & BANKERS involved in the Global Supply Chain, can each carry significant risks. Particularly in times of financial turbulence, rapid, informed decision-making is a prerequisite. For pricing to be competitive and sustainable rating requires to be accurate.

PROBLEM: Conventional tools are inadequate and inappropriate for dynamic [non-linear] systems. The tools and techniques developed for the management of risk do not measure Complexity or the robustness [resilience] of the system or network. Time and money should not be spent on risk management, without first analysing the underlying system.

As Phillip Greening says:

…systems and structures are required that are attuned to sensing and reporting in near-real-time throughout the supply chain, including at least the top two levels of suppliers. Metrics about manufacturing capacity, inventory holdings and transport availability on a global basis are prerequisites. Success will be defined by a company’s ability to process such information fast, which will in turn be highly dependent upon the information systems deployed to the task. The problem for many companies is that their existing IT infrastructure is more aligned to old linear, deterministic and rigid processes rather than the requirements of a complex and fast changing world.

Loss Prevention: Dealing with “epistemic uncertainty”

As the title of our (Ontonix USA) White Paper, Top 5 Reasons for Supply Chain complexityMeasuring and monitoring complexity to generate early warnings”, indicates, from past experience, complexity analysis enables the user to “extend their risk horizon” into the realms of uncertainty.

Increasing or fluctuating complexity serves as advance warning – or “crisis anticipation” – enabling the user to determine the most appropriate course of preventative action.

example: seismic activity and tsunami warnings

Related articles by Zemanta

2 Responses to Supply chain complexity

  1. Ashik says:

    As the title of our (Ontonix USA) White Paper, Top 5 Reasons for Supply Chain complexity – “Measuring and monitoring complexity to generate early warnings”, indicates, from past experience, complexity analysis enables the user to “extend their risk horizon” into the realms of uncertainty.

  2. Hi Ashik: sorry but I was unsure as to whether this was a question so have assumed it is! The following may help:

    A complex system CANNOT perform functions for which it was intended without, first, possessing and maintaining the minimum amount of complexity to do so. Therefore, by monitoring current complexity, the potential risks associated with loss of function(s) due to endogenous events, are “pre-empted” by fluctuations in the complexity measure. The observer obtains a quantitative basis for “risk decisions” to maintain a healthy system that may otherwise appear counter-intuitive based upon the limits of past experience.

    The complexity measure serves as a single metric for the “fitness” of the system with the ability to identify and manage sources and avoid loss of function as a result of, loss of, or, excessive complexity: reducing uncertainty by extending the “risk horizon” to distinguish between unforeseen [Epistemic] and unforeseeable [Aleatory] uncertainty.

    Excessive complexity: too much of a good thing…

    Complexity cannot grow indefinitely. The laws of physics ensure that every system can sustain its own specific maximum amount of complexity before it becomes unmanageable and before it loses integrity. This limit is known as critical complexity. In the proximity of this threshold systems become unstable. Close to critical complexity a corporation loses resilience, becomes fragile and vulnerable.

    David

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s