BUAD 331 Chapter 8 and 10: When we increase the complexity in our supply chain we increase risk supply chain complexity and risk. Complexity doesn’t mean complicated but rather describes a condition of interconnectedness and interdependency across a network. Managing Supply Chain Complexity - Network Complexity: the more nodes and links that exist in a network then clearly the more complex it becomes. The potential for unexpected disruptions to the supply chain is clearly heightened by these extended networks. - Process Complexity: Lengthy processes containing many different activities will not only create extended lead times but are also more prone to variability in performance. We aredesigning more products and having new designs, meaning we need more process to the supply chain to take this into account. The more steps in a process and the more “hands-off” that exist, the greater the likelihood that there will be frequent discrepancies between planned and actual outcomes. - Range Complexity: The rate of introduction of new products or services, new pack sizes or variants and brand extensions seems to outpace the rate at which existing products orservices are being eliminated. This impacts forecast accuracy. We want things more customized.- Product Complexity: Product complexity can arise because the number of components or subassemblies is high, or because there is little commonality across the Bills of Materials for different products. If components or materials are specified which happen to have lengthy replenishment lead times then the ability to respond rapidly to changes in demand for the product will be impeded. - Customer Complexity: too many non-standard service options or customized solutions. Every customer wants something different in a timely manner. - Supplier Complexity: Increases the amount of relationships needing to be made and managed. Supply things in a timely manner and have variety. - Organizational Complexity: Inwardly looking with a focus on efficiency rather than customer facing with focus on effectiveness. Over time the functions have a tendency to become ‘silos’ with their own agendas and they can lose sight of the fundamental purpose of the business, i.e. to win and keep profitable customers. - Information Complexity: The volume of data that flows in all directions is immense and not always accurate and can be prone to misinterpretation. Information complexity in a supply chain is directly or indirectly influenced by the other seven complexities. An antidote to information complexity is reducing the other seven complexities as well as creating greater visibility. The cost of complexity in the supply chain is the Pareto Law (80:20 rule) Mastering complexity:Because the supply chain complexity is such a major source of total end to end pipeline costs as well as being a significant inhibitor of responsiveness, it is essential that complexity reductionbecome priority. Understand the sources of complexity  undertake Pareto 80:20 analysis  Focus on the ‘longtail’  Which elements of complexity add value and which do not?  Seek to eliminate non-value adding complexityBoeing 787 Global Supply Chain- They have engineering culture and to be in charge you have to be an engineering major.Had to configure their supply chain a different way to make this certain plane. To sell the plane, in other countries each country wanted a certain amount of product to be made in home countries. Boeing had to adapt SC to that. SC has huge amount of complexity. What % of US firms do you think have a SC risk management strategy? - Less than 20% and number is decreasing. If we ask where companies need to fix their SC’s they often say risk. If you don’t have a plan to reinsure shareholders after a disaster then you’re screwed. Types of SC risk: - Supply o How vulnerable is the business to disruptions in the supply? Risk may be higher due to global sourcing, reliance on key suppliers, poor supply management, etc. - Demando How volatile is demand? Does the ‘bullwhip effect’ cause demand amplification? Are there parallel interactions where the demand for another product affects the demand for ours?- Processo How resilient are our processes? Do we understand the sources of variability in those processes, e.g. manufacturing? Where are the bottlenecks? How much additional capacity is available if required? - Control o How likely are disturbances and distortions to be caused by our own internal control systems? For example, order quantities, batch sizes and safety stock policies can distort real demand. Our own decision rules and policies can ‘chaos’ type effects.- Environmentalo Where across the supply chain as a whole are we vulnerable to external forces? While the type and timings of extreme external events may not be forecastable, their impacts need to be assessed.Mitigate through Redundancy- Inventory and capacity- Multiple facilities/suppliers- Pooled demandManage through Resilience- Postponement - Lean processes- speed and reliability- Improve visibility - Leverage supplier relationships - Control complexity and variability Managing Supply Chain Risk1. Supply Chain (re)Engineering- Understand the SC- Improve SC - Identify critical paths (links and nodes) - Manage critical paths - Improve network visibility - Establish a SC continuity team - Work with suppliers and customers to improve SC risk management procedures 2. Supply Chain Collaboration- Collaboration planning - SC intelligence 3. Agility - Visibility- Velocity and Acceleration 4. Creating a Supply Chain Risk Management Culture- Establish SC continuity teams - Board-led responsibility and leadership - Factor risk considerations into decision making These 4 steps create the resilient supply chainsChapters 11 and 12Supplier Collaboration: How do we work together? Traditional view of competition: Individual business compete as stand alone entities New Paradigm of Competition:Supply chains compete with one another- Preferred customers—invest where it makes sense, better relationships Look at Major Business Transformations slide it summarizes old to new paradigm Recipe for Competitive Advantage:- Concept-based continual learning in addition to experience - Internal and external relationships - Information visibility to maximize communication and effectiveness - Integrate demand and supply as tightly as possible - Goal: Quickly respond to market changes effectively and efficiently –