Supply Chain Complexity

Abstract

This chapter focusses on the concept, drivers, and perspectives of supply chain complexity of a firm. It discusses the impact of number of tiers, number of nodes in each tier, its links and flows on complexity of a firms' supply chain. This chapter tries to bring out the dynamic interactions between tiers and nodes. This chapter suggests that the levels of supply chain and its dynamic complexity are influenced by the products, processes, relationships, and the environment of the firm and its suppliers and distribution partners. Here the drivers, namely, the 5Vs (value, volume, variety, volatility, and visibility), 3Ps (process, people, and planet), and the global market (as a driver) that lead to complexity have been discussed. The complexity of supply chain has been explained from different perspectives. These are the system and process perspectives. This chapter introduces the concept of systems thinking proposed by Forrester and Senge. It illustrates the need to apply a holistic approach in reduction of supply chain complexity. The causality doctrine, proposed in this chapter, enables a supply chain manager to carry out policy experimentation. Supply chain structure varies across organisations. This suggests that a process framework along with application of systems thinking will aid supply chain managers to make supply chain less complex and lean. That is, the supply chain has the desired properties, namely, repeatability, testability, serviceability, flexibility, and cost efficiency. The next section talks about the importance of production processes in reducing complexity. Finally, the chapter discusses about the optimal number of suppliers a firm may have to meet its objectives. It argues that if past do not extend in future, the number of suppliers will add redundancy to the upstream supply chain, and at the same time, if future exceeds past, the supply chain fails. There are different options available to meet these challenges. These could be “buy-back” or “pay-back” or “rate contract” options. This chapter introduces the computational framework for assessing complexity of a firm based on its structure. This framework will help supply chain managers to carryout experimentation on the design of a supply chain network.