5 Keys to Coping with Complexity in Modern Logistics
Brian Hoey - January 22, 2019
When you play chess, you’re supposed to think several moves ahead. This means that whenever you move one of your pieces, you should be anticipating the possible moves that your opponent will make in response, and what you’ll do in response to your opponent’s next moves. Since at each stage there are multiple possibilities, the possible scenarios you need to keep in your head at any given time begin to multiply pretty quickly. And yet, for each scenario it’s imperative to be able to look at the entire board in your mind and consider all of the hazards and opportunities that present themselves. In this way, it’s a little bit like logistics planning.
Now, let’s say that instead of a standard chess set, you’re playing on a board that keeps expanding into more and more squares. As the board gets larger, new rules crop up—rules that might only apply in certain parts of the board or with certain pieces. In an increasingly globalized modern supply chain, this expanding chess set might be the better metaphor. As trade routes proliferate and new sources of data come into play, an already complex task becomes almost forbiddingly so. What can modern supply chain managers and logistics managers do to cope with the ever-increasing complexity of modern logistics?
1. Improve Your Forecasts
Let’s take a second to ask a critical question: what is it about complexity that’s problematic for supply chain managers? In part, it makes it harder to predict the outcome of any given decision, meaning that disruptions (in the form of unexpected events) are more likely to arise to derail your plans. The most direct way to cope with this is to deal with prediction head on and improve your forecasts with advanced predictive analytics. By leveraging your existing operational data into advanced analytics workflows, you can create forecasts that account for the growing complexity of the market and develop plans that reflect your data-driven expectations. This decreases the likelihood of the unexpected (though of course it doesn’t eliminate it entirely), resulting in fewer disruptions overall. After all, if you know what demand levels or freight costs will be in advance, you’re less likely to be blindsided by unexpected dips or upticks.
2. Take Control of Your Capacity Management
As the number of trade routes and major shipping hubs continue to proliferate, it’s crucial to remember that transport planning begins at home. A more global marketplace means that demand itself is more globalized, and thus more complex—because not all orders are created equal, geographically speaking. For this reason, it’s crucial to start from a position of control and understanding within your own organization. Specifically, you’ll need to determine what your maximum capacity levels are (whether that’s a matter of finding the bottleneck within your production lines or calculating your total freight capacity), and examine the ways that those levels change based on customer location and other requirements. By gaining this level of insight into and control over your own operations, you can be sure that you’re not overextending (or underutilizing) your capacity, ensuring that you don't put yourself in a position where on-time deliveries become impossible.
3. Integration, Integration, Integration
Above, we discussed the ways in which increased complexity can decrease predicability, leading to disruptions. The other issue with increased complexity? Inefficiency. Think back to our chess metaphor: even if you’re not actively courting disruption, the more options you have at every step of the value chain, the less likely it is that you’re giving each possible route, tour, and shipping option its due consideration. This means that you may be failing to identify the most efficient and cost effective routes because there are simply too many possible options. This is where supply chain integration comes in. It might seem paradoxical to solve a situation involving too many choices by integrating more data into your value stream, but in point of fact the more data you have the more successfully you can analyze your best options. This can take the form of both prescriptive analytics processes (which can help to uncover areas of ongoing waste) and the increased agility that frequently comes as a result of E2E visibility (owing to the more comprehensive view of the entire value chain that it provides).
4. Use “What-if” Scenarios
Okay, let’s say that you’ve implemented advanced analytics workflows and you’ve increased your visibility levels to get a better handle on the entirety of your increasingly-global value chain. How else can you leverage that newfound visibility? “What-if” scenarios. Essentially, “what-if” scenarios enable you to model your entire supply chain digitally in order to simulate the effects of proposed changes or potential disruptions. In earlier, less-complex contexts, this might have been the type of thing that planners could do manually—a simple manufacturing line might respond in fairly obvious ways to the introduction of a new machine or a new schedule—but the modern logistics landscape is too vast and varied for pen and paper estimation to cut it. Your transport network is vast and far-reaching; how would it respond if you removed a particular hub or cross dock? What about adding a warehouse? By making these determinations with more certainty, you continue to stave off the effects of unexpected disruptions.
5. Implement Real-time Data
The one other thing planners need to contend with in an increasingly global supply chain? Speed. Things move quickly, situations can change at the drop of a hat, and planners need to be able to cope with this fact. The complexity of a given situation only increases as time goes by without action being taken. For this reason, real-time integration can be a huge value added proposition for companies seeking to decrease complexity in their logistics operations. If you can monitor situations in real-time, then you can react and make adjustments more quickly, preserving the maximum amount of possible value in the face of dicey situations. In fact, you can be not just reactive, but proactive, identifying potential pitfalls far in advance and taking actions to stabilize your logistics operations. In this way you cut down not just complexity, but risk—resulting in more on-time deliveries and fewer unwanted snafus.