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Are the feedback loops in your Supply Chain fast enough?
Supply Chains are complex systems involving multiple entities with inter-dependencies and inherent variability. If a supply chain has to run effectively, it must be designed using the basic principles of Complexity Theory.
A key design requirement of such complex systems is the presence of feedback loops, wherein we connect the output of a sub-system to adjust and fine tune the input parameters. It is pretty much similar to voltage stabilizers and speed regulators. If the feedback loop is designed properly, voltage and speed will be steady, else it would fluctuate in a chaotic manner.
Feedback loops are designed for a specific time delay. It is the time elapsed between sensing (reading the output signal) and action (adjusting the input parameters).
The most important feedback loop in supply chains is between sensing demand (frequency and granularity) and adjusting supplies (deployment, production, procurement). Most traditional companies operate on a monthly sensing and monthly action loop, which makes their supply chains slow to respond. Stockouts and inventory pileups are the result of such slow feedback loops.
The most important transformation in such supply chains is to go for Fast Feedback Loop, which adjusts supplies to changing demand patterns on a dynamic basis. Progressive companies have moved from monthly to weekly to daily loops and seen their supply chains become more responsive and agile.