Reducing uncertainty in European supply chains

Abstract

In this paper, we show that reducing supply chain uncertainty increases responsiveness and thereby benefits bottom line performance as assessed via total cycle time reduction. We term this effect as the uncertainty reduction principle. To enable uncertainty reduction we use the uncertainty circle to focus on the sources to be eliminated. We also show that these sources of uncertainty can react and magnify in a flywheel effect caused by poor supply chain management. A supply chain audit methodology is described for identifying and codifying uncertainty. The proposition advanced herein is that smooth material flow leads to and statistically correlates with uncertainty reduction. Examples are given of good real‐world supply chain practices thus identified and subsequently improved. Transferability of the uncertainty reduction principle is assured by establishing readily assimilated “best practice” guidelines via the study of “exemplar” operating characteristics.