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SUPPLY CHAINS TO ADMIRE | 2025
The Role of Complexity
Complexity throws the supply chain out of balance. In business, there is both good and bad complexity. It is analogous to cholesterol. Good complexity increases market share and drives growth with a minimal impact on margin, while bad complexity does not improve share but has a significant detrimental effect on margin. Leaders actively manage complexity through robust horizontal processes, focusing on revenue management, Sales and Operations Planning (S&OP), new product launch/ innovation (NPI), Corporate Social Responsibility, and Supplier Development. These cross-functional programs align strategy with execution. Through the processes, there is a conscious choice to manage and actively reduce bad complexity through cross-functional processes.
The issue? The reality is sadly out of step with what drives value. Only 1/3 of companies have a supplier development program, and more S&OP processes are out of alignment (65%) than aligned organizationally. New product launches and Corporate Social Responsibility programs usually have grand aspirations but operate in silos. Due to complexity issues, the gap in performance between process-based and discrete industries has widened over the last decade. We feel this is one of the reasons many process-based companies are regressing on the Supply Chain Metrics That Matter.
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