Ontonix: KPI’s and the "Supply Chain"


Project 365 #237: 250809 Fingers Crossed!

Image by comedy_nose via Flickr

Supply Chain vulnerability has not been more graphically illustrated than it has been by a succession of nature disasters and Geo-political upheaval experienced in recent times. We are all paying a price…some considerably higher than others! The question is: “What will we learn from devastating floods, earthquakes and tsunamis?”

Whilst, in our busy lives, we cannot afford to pause for long to consider the devastation and loss suffered by so many, we cannot ignore the lessons that these events teach us as individuals, families, communities and nations.

From a business perspective we cannot overlook the simple truth that, although we have become very good at identifying and managing risk, without preparation, our whole way of life and much of what we take for granted can be destroyed in minutes by “rare events” AND natural disasters.

In modern business there are so many activities that require to be closely monitored that the task, in itself, can create even greater uncertainty unless simplified. That is what we, at Ontonix, attempt to create for our clients…

Specific KPI can be defined for Marketing, IT, Sales, production, etc. The problem, in any event, appears to be a subjective one, namely that of choosing the right parameters and, most importantly, understanding the business well. In KPI definition the so-called intangibles are avoided since they cannot be measured.

Science teaches us that even though everything is relative, there do exist objective and tangible properties of systems which may be measured. When dealing with mechanical systems energy is one. Mass and temperature are other examples.

Complexity is an attribute of systems which today can be measured. Growing complexity in all spheres of social life is the biggest threat to sustainable development and to a resilient economy. It would be great to measure it and to use it as a new meta-KPI. The pop-science definition of complexity, which equates it to a “process of spontaneous self-organization at the of edge-of-chaos” (by the way, how do you measure that?) is not of much use. We propose a definition of complexity which combines topology and entropy (now that can be measured), i.e.  C=f (T; E). Let’s see an example of how this definition of complexity can be used as a new KPI.

In Supply Chain Management, for example, KPIs will detail the following processes (see the Wikipedia):

  • sales forecasts
  • inventory
  • procurement and suppliers
  • warehousing
  • transportation
  • reverse logistics

via Ontonix – Complex Systems Management, Business Risk Management.

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