Systems Thinking in Supply Chain Management
Most every industry has a complex supply chain working behind the scenes to gather components, assemble them into products, and ship them to stores to sell to consumers. These supply chains are often complex with many moving parts and, in more cases than not, relying on third parties to carry out one or more of the tasks along the supply chain, such as manufacturing or fulfillment. It is imperative to apply systems thinking to supply chains because when all parts of the supply chain act independently there are a variety of issues that arise. One major issue is the bullwhip effect which is when supply chain members use independent forecasting methods that project incoming demand upwards to maximize potential profit. Once these forecasts make it down the supply chain they compound and produce a massive false demand resulting in excess inventory for supply chain members upstream. By applying systems thinking to the supply chain, members can map out how certain actions will affect other members of the supply chain and reduce bullwhip effect volatility. What other risks arise when supply chain members act independently? Can these risks be mitigated or avoided by applying systems thinking?