Supply Chain: Efficient or Flexible or Constructal?
Supply Chain: Efficient or Flexible or Constructal? Two people whom I personally consider thought leaders in the supply chain space write blogs about Supply Chain Management.
They both wrote articles last week which got me thinking about the right way to go about designing and operating the "Ideal Supply Chain". I would love to hear your ideas about this after you read these two viewpoints and my thoughts.
The first case in point: Christian Verstraete's blog about Supply Chain and Technology. In his post on The Flexible Supply Chain - ESC Day 1, he recounts the discussions at the Extended Supply Chain 2010 Conference which he'd attended.
Here are his opening words:
"This year’s theme was: The Flexible Supply Chain – meeting customer needs by responding efficiently to constantly changing market conditions."
On the face of it, the theme seems pretty well thought out - especially with many companies starting to finally look positively towards the future.
But this line, especially the mention of "efficient response" reminded me of another blog post on the Kinaxis Supply Chain Expert Community written by Lora Cecere.
If you're in the Supply Chain space and are not a member of this community, you should be. It has a lot of information and meaningful discussion taking place. Lora is one of the few supply chain "thinkers" I've come across online.
She expresses her thoughts on her personal blog too. She recently wrote a post on her Kinaxis blog titled "What we can learn from Mother Nature". I found this to be an extremely interesting post about "efficiency" being a wrong goal most companies have generally used while designing their supply chains.
This is why Christian's article caught my attention. Lora argues that the most efficient networks in nature are designed to be the most redundant, not the most efficient - and that efficient supply networks might function well for a while but break down frequently. Here’s an excerpt.
Over great seafood in Austin, we discussed what nature teaches us about networks. Networks with the greatest resilience, ability to stand the test of time, are not the most efficient. In fact the least resilient networks in nature are the MOST efficient.
Instead, the most resilient networks have two characteristics:
In nature, the networks that last over the generations are those that have the right amount of redundancy. Excess capacity, extra nodes, and bypass routes. The efficient network with minimal capacity, node-to-node connections, and no parallel routes fail. This is especially true in push environments.
Likewise, in nature, the networks that stand the test of time have the ability to reconfigure under stress. Networks with the most centrality have the greatest failure rate.
About a month back, I was introduced to something called the Constructal Theory. It is a design theory that mimics nature's design philosophy in engineering.
There's a Wikipedia article explaining the theory.
"in the constructal theory's point of view, the naturally optimized forms such as rivers, trees and branches, lungs and also the engineered forms coming from a constructal evolutionary process of maximization of flow access in time."
I have been thinking about the application of Constructal Theory in Supply Chain Management. The basic premise of the theory is for flow systems (in this case, flow of materials in a supply network) to maximize flow access.
This is especially true in the case of supply chains too. Maximizing flow access in time will allow more reach while using up the same amount of resources (from a network point of view). The supply chain application does make sense but it isn’t proven yet.
Let us for a moment assume it has indeed been practically shown that the theory applies to supply chains too. Consider the goals discussed in the ESC conference - A flexible supply chain that responds efficiently.
Note that the network (in this case the supply chain by design) needs to be flexible, not efficient. The ideal network would respond efficiently to changes. Building an efficient network and a network responding efficiently are two completely different things. Now let us bring in Lora's thoughts about the best networks in nature being redundant.
However, redundancy is the enemy of efficiency. So how do we build a supply chain network that responds efficiently? The answer is the 'people' factor. At the core of a Supply Chain are the people running it.
I have previously written about the importance of people in building a world-class supply chain. One very important lesson anyone can take away from this confluence of viewpoints is the following:
"The flexibility of a supply chain and its ability to respond to different demand patterns is a direct result of the network design. However, the efficiency of a supply chain and the speed of response depends more on the people that run the supply chain."
Let's find more useful article in this blog.