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There is a distinct and critical difference between keeping things simple and oversimplifying (which actually results in unwanted complexity).
Click here for a fantastic series of articles in PDF format by Luke Tomkin of GRA (originally published in Logistics Magazine) - 14 pages of easy reading in all.
This gentleman obviously understands the Myth of Large Numbers.
“I have yet to see any problem, however complicated, which, when you looked at it in the right way, did not become still more complicated." - Poul Anderson (1926-2001)
A couple days ago, I did a Google search on the term “retail supply chain complexity”. An estimated 1.7 million results were returned.
Then I searched on “retail supply chain simplicity”: 321,000 results.
While this method is hardly scientific, it does tend to support the notion that there is a widespread belief that the retail supply chain is complex. (Quick side note: At the time of writing, 2 of the top 10 results on Google for the search term “retail supply chain simplicity” are related to Flowcasting. This may explain why some folks in the supply chain community think we’re off our nut.)
The perception that the retail supply chain is fraught with complication should come as no surprise to anyone who has read an industry publication in the last 10 years (as a case in point, I just received my February 2008 edition of Global Logistics & Supply Chain Strategies, the title of which is “Complexity Masters”).
But where does this perception come from? Is it justified or a red herring?
Ask a supply chain professional what makes the retail supply chain so difficult to manage and you’ll hear things like:
- thousands of stores
- tens of thousands of products
- hundreds – if not thousands – of suppliers
These things are true. However, all this does is explain why the retail supply chain is BIG.
Consider the U.S. Postal Service. They deliver 213 billion pieces of mail annually to over 146 million addresses and P.O. boxes in the U.S. using multiple modes of transport (including mules!). Something that big MUST be really complicated.
But when’s the last time you had a letter lost in the mail? According to the USPS 2007 annual report, on-time delivery reliability exceeded 96% (and it probably spikes even higher if you include letters that are a little bit late, but still made it to the destination).
Despite their size, the USPS (and any major postal service in a developed country for that matter) has made the CHOICE to keep things simple:
- a single price to mail a letter anywhere within the domestic network
- a geography based ZIP code system that can quickly route deliveries
- standardized way of filling in addresses on envelopes
- all of the automation opportunities that arise from keeping the PROCESS simple
Here’s another example. Ask yourself this question: when was the last time FedEx lost one of your shipments? Answer: probably never. Yet, FedEx runs a huge supply chain. They move 7.5 million shipments daily, through a network of over 1,400 stations utilizing 10 air hubs and 675+ aircraft flying into and out of 375 airports worldwide.
Their delivery performance? Consistently 99% on time!
All because FedEx’ founder Fred Smith conceived of a simple way to route shipments from point A to point B using a hub and spoke concept – at the time a counter-intuitive routing construct that worked like a dream. Because it was so simple.
The point I'm trying to make here is that if BIG = COMPLICATED, then there’s no way the USPS or FedEx should be able to achieve such high levels of performance.
Maybe there’s a lesson for those of us who work in the retail supply chain. We may one day stop being supply chain professionals, but we’ll always be retail customers.
Customers want products. The way POS data collection has evolved over the years, it’s actually fairly easy to figure out WHAT products they will want, WHERE they will buy them and WHEN. This is true whether you’re looking at 100 products in 10 stores or 100,000 products in 1,000 stores.
In retail, the size of the problem may be something that’s beyond your control, but complications will arise if you don’t consider the supply chain to be one tightly integrated process from the factory to the store shelf – and plan accordingly.
Size is a given in the retail supply chain, but complexity is a choice.