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Managing the Complexity Paradigm

This paper offers insight into managing supply chain and product complexity by providing background into the complexity’s sources, a framework for understanding its drivers, and methods to manage it. By APICS & Michigan State University

Key trends have emerged following in-depth interviews with more than 50 firms around the world.

This whitepaper reviews the research findings surrounding the creation of value through procurement and sourcing efforts in integrated supply chains, including key practices and implementation recommendations.

Supply chain executives cite supply chain and product complexity as two of the major challenges that keep them up at night.

The top insomnia-inducing item in the Beyond the Horizons (BTH) research is “Understanding the End-To-End Supply Chain.”

This refers to the firm’s ability to track product and information flows across the entire supply chain.

With global multi-tiered supply chains, firms are increasingly challenged to be able to understand the complexity of these flows.

Omni-channel marketing has opened a number of new flows to the marketplace (direct from manufacturer, through distributors, and direct to home), and consumers are looking for more customized products, as well.

This combination implies that supply chain executives are experiencing increased complexity.

While such complexity provides the benefits of increased revenue by providing consumers with more customized products from the best sources, the increased complexity also generates increased supply chain cost and assets - because increased flows and stock-keeping units must be managed.

Product and market complexity have challenged firms for years. Firms have searched repeatedly for ways to reduce complexity.

While one obvious answer is to reduce the number of products or markets, the desire for revenue growth has limited that as an option.

The result is that firms are experiencing increasing complexity through a growing number of products, customers, channels, and geographies.

The BTH respondent firms are no exception to this trend.

While they acknowledge that reducing complexity through the traditional means of reducing products and markets is not likely to happen, their insight does provide some additional direction regarding how to change process complexity.

A deeper understanding of value propositions and the application of collaborative partnerships, information technology, and more flexible operations have demonstrated opportunities to reduce process complexity.

Reducing process exceptions will help firms achieve better performance.

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