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It is not always easy for a business to understand the true cost of supply chain complexity. It can be hard to recognize the impact it is having on day-to-day operations, product availability and critically, customer service.

At BearingPoint, we often advise businesses to take a more structured approach, one that widens the typical analysis that is routinely undertaken. The aim is to create a new perspective and series of insights of direct concern to the Board. We can then focus on the three themes that address the true ‘Cost of Complexity’:

True_cost_of_complexity_supply_chain

These fundamental themes still draw upon the philosophies of waste and time reduction, and the removal of process variability but crucially, they address business processes across all dimensions of complexity.

At BearingPoint we have developed a fact-based approach that yields practical results that can be quickly implemented:

  1. Map the main supply chains - specifying their typical trading and flow characteristics (selectively applying Lean and Six Sigma principles); it is essential to segment these flows, grouping like activities are far as possible and establish their unique features that must be managed or controlled
  2. Design out complexity - (where possible), or in many cases determine how best to manage it. Establish simple management rules and guidelines to introduce greater control and governance over the range of channels that exist, thereby limiting the degrees of freedom a business has to contend with
  3. Streamline management processes - in order for them to become more predictable and resilient
  4. Design in responsive capability and capacity - for those areas of business that require the flexibility to be more demand driven
  5. Define a roadmap - discrete interventions across all areas of business that will cumulatively give rise to a significant margin/profit improvement

Tangible benefits

There are good reasons to put mastering complexity on your agenda. Revealing true supply chain complexity will help identify the real cost drivers and enable a focus on net profit. It will deliver a clear, repeatable and agreed cost position for a business, an essential requirement for benchmarking performance and delivering operational improvement.

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