Complexity and the supply chain

We have several times in previous chapters suggested that rather than refer to supply chains we should talk instead about networks. The idea of a chain suggests a series of linear one-to-one relationships whereas the reality is that the focal firm lies at the centre of a complex web of interconnected and interrelated yet independent entities. 

Partly as a result of outsourcing activities that previously were performed in-house combined with the trend to offshore manufacturing, many companies have found that they have added to the complexity of their operations because the degree of interdependency across the network has increased. Thus an event or action taking place in one part of the network will often have unforeseen impacts somewhere else in the network. The unpredictability of these events is heightened by the growing volatility that characterises today s business environment. 

The well-known butterfly effect seems to typify much of today s supply chain turbulence. The idea is that a butterfly, flapping its wings somewhere over the Amazon basin, can cause a hurricane thousands of miles awayl Whilst this example of what is sometimes described as chaotic effects may be a little far-fetched, it provides a useful reminder of how the law of unintended consequences applies to today s highly interconnected supply chains. 

In April 2010 a previously dormant volcano in Iceland erupted, sending a plume of ash into the upper atmosphere. A cloud of ash and debris from the eruption began to drift across the skies of Northern Europe. Because of a concern for aircraft safety most airports in the region were closed for the best part of a week. Whilst there was a considerable impact on individuals travel plans - many thousands of people were stranded away from home - there was also a less visible. 

The impact of the ash cloud has been felt on the economy for the first time, with manufacturing companies warning that they will have to shut down production because of a shortage of components. 

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Commodity-oriented models focus more on the market interfaces in sales and procurement and consider less complexity in the supply chain determining volumes and values in the value chain integration with production planning and chemical-specifics often not modeled... 

Rubber parts are extremely susceptible to materials mix-ups. The complexity of the supply chain between the rubber pro-ducer and the part user is the principal reason. Carbon black is the most effective filler material for optimum mechanical and chemical resistant properties. Consequently, most rubber parts are black, which is a serious impediment to positive materials identification. The end user must man-... 

Complexity of the supply chain including multiple parties and changes of custody during transit... 

Because of the size and complexity of the supply chain network structure, the representations of inter-organization relationships and interdependencies between them are necessary. As the patterns between partners might be different, the process of producing comprehensive maps of the network to identify the interdependencies is essentially required. The next section outlines a business process improvement procedure for e-SCM and identifies some interdependeneies existing between supply chain processes. 

A highly complex and distributed supply chain makes it difficult to shut down the entire system by interruption at a single point. However, determining if an attack at a dominant node or a dominant link of the supply chain of a critical chemical would bring production to a standstill is a high priority in determining overall vulnerability. In order to achieve a widespread interruption in production for an extended period, multiple, well-placed interruptions would have to occur at one or more dominant nodes or dominant links (or both)—in most cases, at multiple geographic locations. 

In the U.S., healthcare is an industry in turmoil. Much of the turmoil is due to the complexity of the supply chain, which includes medical service providers, medical groups, insurance companies, employers, government regulators and, of course, users of healthcare services. Most people don t pay directly for healthcare services. Private companies, through their employee benefit plans, and the government, through Medicare and Medicaid, pay most of the bills. 

A supply chain is movement, specifically the movement of three key resources materials, information, and money. The movement of these resources is affected by a series of forces that interact with the overall supply chain. The objective is to make the entire supply chain as seamless as possible to the customer, while at the same time integrating all the operational complexities of the supply chain into an optimized, well-performing machine— which leads us to the next chapter s discussion of Supply Chain Management. 

Underlying much of the cost of complexity in the supply chain is the Pareto Law (the so-called 80 20 rule). Vilfredo Pareto (1848-1923) was an Italian industrialist, sociologist, economist and philosopher. In 1909 he identified that 80 per cent of the total wealth of Italy was held by just 20 per cent of the population. Thus was born the 80 20 rule that has been found to hold across many aspects of social and economic life. In Chapter 2 it was suggested that an 80 20 relationship exists with regard to customers and products, i.e. typically 80 per cent of the profit derives from 20 per cent of the customer and likewise 80 per cent of the profit comes from just 20 per cent of the products. Generally this 80 20 relationship applies across most elements of the supply chain and is a key contributor to complexity and hence cost. 

The uncertainties associated with natural disasters create complexities in the supply chain, and they need to possess the capabilities of disaster prevention and fortiflcation, preparedness, relief, and recovery. Both proactive and real-time response decisions should be enabled in the supply chain. Redundancies such as prepositioned inventories, fortifled homes and businesses need to be balanced with the cost of logistics and procuring supplies at short notice. As the disaster may strike at only one of potential sites, the supply chain must be structured for transshipment of supplies from other sites where disaster did not strike. As human lives are at stake, the supply chain also needs to be endowed with a rapid infrastructure-repair capability (humanitarian supply chains are discussed in Chap. 8). 

In general, complexity in the supply chain is made worse at an organisational level because of aggressive global and international sourcing of materials and products. This reduces the cost of goods sold. However, complexity adds substantial distance, time and dependence on the international logistics pipeline. These increase the risk of supply chain failures. 

These are therefore some mechanisms for the development of chlorine complexes and the continued supply chain of chlorine through the derivatives. These also allow the increased use of HCl in the system and some control of the caustic supply. 

Product quality, purity and consistency are critically important in the pharmaceutical sector, applying to all stages of the supply chain and final dosed product. The human body is an exceptionally complex system and the full effect of a pharmaceutical product, consisting of the API, impurities and formulation components, is impossible to predict from first principles. The industry relies on rigorous clinical trials to assess drug efficacy, toxicity and side effect profiles. 

The constellations of actors in the supply chain vary between comparatively simple and linear stracture with few actors, and highly networked and complex stractures. Two basic types of iimovative system and innovation level complexity can be deduced and to which each of the 13 case studies of the SubChem project can be assigned. As an ideal type ... 

Oh, you re just a distributor. If I had a nickel for every time I heard that when a prospective customer approached our booth at a trade show, let us just say I wouldn t have to be working. Many assume that the role of distributor can be relegated to that of middleman, reseller, or intermediary one who lacks the expertise of those who actually manufacture products— Oh So you just buy products and resell them to someone else. These gross oversimplifications do little to explain the scale, complexity, and critical role that a distributor plays in the movement of goods and services from manufacturer to end user (the supply chain), particularly in the pharmaceutical industry. 

Single-sourcing restrictions can be employed between different echelons of a supply chain. Their objective often is to reduce the complexity of the supply network. For example, in a production-distribution model a restriction might be included to ensure that each customer is only served by one distribution center (e.g., Tsiakis et al. 2001, p. 3590 Geoffrion and Graves 1974, p. 823). 

Over the course of time, chemical distributors have developed in the complex small-volume, rapid-response area of chemical distribution into playing an important role in the supply chain from chemical producers to consumers. In addition to fundamental delivery capabilities, distributors offer value-added services, skills in complying with environmental and safety standards, and economy of delivery to remote and small customers. 

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