SIMPLIFY
ARTICLE
Supply chain complexity: opportunities for
simplification
EXECUTIVE SUMMARY
Complexity is the cumulative by-product of organisational changes that weave often invisible
complications into the way work is done. As Ron Ashkenas wrote in Harvard Business Review, “Big
companies have always been complex. But to cope with new challenges such as globalisation,
they’ve increased their complexity — with proliferating products, tangled reporting relationships and
duplicated processes. They’ve become unwieldy, ungovernable and underperforming. And nobody
likes it. Customers complain about not having a single face to a company. Employees bemoan poor
communication and competition among units. Analysts demand clearer numbers. Investors decry
duplication of functions.”
In this article, we share Ashkenas’ suggested opportunity areas to help counter complexity.
In recent years, corporations have rigorously scrutinised their
supply chain processes with Six Sigma, Lean and reengineering
efforts. While these processes tend to be controlled, others haven’t
benefited from disciplined improvement techniques. Processes
such as budgeting and planning, performance management, CRM,
sales forecasting and innovation all evolve as companies respond
to new management teams or regulations. This often results in too
many compromises that introduce too much variability, rendering
processes inefficient.
In a little over a year,
employees generated
3 000 simplification and
improvement ideas,
implemented 900 and
saved $14 million.
Ashkenas and his team identified four opportunity areas that business leaders can exploit to gain greater
control over their growing monoliths, improving business results simultaneously. “But to counter complexity
successfully,” Ashkenas cautioned, “leaders need to address all four in a continuous, multidimensional
strategy.”
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ARTICLE
1.
SUPPLY CHAIN COMPLEXITY: OPPORTUNITIES FOR SIMPLIFICATION
STREAMLINE COMPANY STRUCTURE
After identifying simplification as a business imperative, leaders can begin a continuous attack
on structural mitosis. That means occasionally adjusting the structure to ensure it serves
the business strategy and market needs and is as simple as possible. Whether you’re centralising
functions or shifting reporting relationships, think of organisational design as a dynamic, organic
and ongoing process instead of a one-time engineering exercise.
2.
TIGHTEN UP PRODUCTS, SERVICES AND FEATURES
When the right structure is in place, take a hard look at the company’s products and
services. Are there too many? Which are profitable and have the greatest growth potential?
Which have run their course? Complexity reduction can take multiple forms. To find answers, do
a classic portfolio review periodically. For many companies, initiatives to reduce complexity are
linked closely to design re-use and increased standardisation. This approach is similar to platform
engineering initiatives adopted by the automotive industry.
Over the past few decades, gadget manufacturers have toiled ceaselessly to add functionality.
Evolving hand-held devices are a case in point. According to a prominent futurist at one of Britain’s
largest corporates, most people buy a device for a particular purpose. They neither want nor care
about the extra capabilities. “We’ve added functionality for 20 years and 99% of that functionality
isn’t needed,” he said.
Another way of addressing proliferation is to set up processes for evaluating how well the company’s
offerings match customers’ needs. The review should focus on both the overall portfolio and
simplicity of individual products. This usually demands customer feedback.
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ARTICLE
3.
SUPPLY CHAIN COMPLEXITY: OPPORTUNITIES FOR SIMPLIFICATION
BUILD DISCIPLINED PROCESSES
Engaging employees across the organisation in process simplification, particularly at
grassroots level, can be powerful. People at all levels become more likely to correct a
problem before it gets out of hand.
At Nortel, the CEO and EVP at the time created a two-hour workshop called ‘Own-It’. Teams of
employees were taught simple Six Sigma tools such as DMAIC, process maps, fishbone analysis
and the Pareto principle. They were then asked to identify processes that they ‘owned’ and could
simplify. If the process cut across areas outside their control, they were encouraged to fix what they
could and engage others as needed. In a little over a year, employees generated 3 000 simplification
and improvement ideas, implemented 900 and saved $14 million. More importantly, a culture of
continuous process improvement and simplification developed at the company.
4.
IMPROVE LEADERSHIP HABITS
If leaders are serious about reducing complexity, they need to identify how their own (often
unintentional) behaviour patterns complicate matters and make a personal commitment to
simplification.
Making your organisation simple and keeping it that way takes hard work. It requires an explicit
strategy and vigilant attention. And senior executive support is vital to the success of any change
initiative. However, simplicity must be more than a feel-good theme. The four simplification strategy
elements will only get traction if positioned as hard business imperatives.
Based on ‘Simplicity-Minded Management’, Harvard Business Review
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