Are adaptive supply chains better?

A number of large global organisations and technology providers are considering this question. A key challenge is that it is difficult to put a price tag on the benefits of adaptability, although paradoxically there is ample evidence that lack of adaptability can cost companies a great deal, both in terms of money and reputation.

The conventional approach to supply chain management, and any schedule-based activity, is centralised command and control systems based on complex scheduling algorithms. These systems assume there is perfect information and all of the variables can be factored into a calculation. Deriving the optimal schedule is simply a mathematical formula. At Lost Wax we do not dispute this is true, however, we rarely see supply chains where there is perfect information and the unexpected never occurs.

In the real word numerous events conspire to destroy the schedule. It is a problem for the largest airlines and transport companies to local restaurants running a booking system. Once a centralised schedule or a command and control system is disrupted it is usually very difficult to recover, without going back to the beginning of the planning process and starting again. Invariably it is the staff on the ground that handles the detailed operational decisions to keep the business process on track. The problem with this is the tactical decision-makers very rarely have a helicopter view of the whole supply chain and as result cannot see the overall impact of their decision - or the cost implications.

A further benefit of adaptive versus centralised systems is the opportunity to develop a system iteratively and analyse the emergent behaviour. The adaptive supply chain does not expect perfect information. The adaptive supply chain will process the available information, and within constraints, will take the best next step. This means that a simple model of supply chain can be set up with a limited number of operational parameters and goals and the results analysed. Incrementally adding more parameters and goals can increase the complexity and sophistication of the supply chain. The resulting model can yield surprising insights in to the way the supply a chain operates and adapts as various disruptive events occur. Analysing every possible situation in order to calculate an optimal schedule, with every possible outcome catered for, is usually beyond the capabilities of most organisations and software developers.