Is Supply Chain a complex system?

Abstract

Nowadays, industries are continually looking to implement new subsidiaries in different continents, in order to better fulfill their customers’ needs, generate the best products in the shortest time and cheaper than their competitors. Achieving these goals is no longer related to the company itself, but to all partners in the supply chain. This justifies the need for efficient and judicious management of the whole supply chain, through the collective intervention of all its actors. Needless to say, a supply chain is a system made up of a set of suppliers, producers, subcontractors, retailers, wholesalers and customers, between whom material, information and financial flows are exchanged. Management of these flows is becoming increasingly difficult and constitutes the main source of the supply chain complexity. In order to alleviate this problem and improve supply chain performance, it is necessary to model it, taking into consideration its characteristics, which make it a complex system. Hence, the scoop of this paper is to prove that supply chain is a complex system, by highlighting its most relevant characteristics that make it such a system. Complex means what is braided together or woven together. If we separate the elements, we get acquaintance elements, but we lose their interactions. Within this trend, our contribution subscribes with its ultimate purpose modelling supply chain as complex system.

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* Corresponding author: raaidisafaa@gmail.com
Is Supply Chain a complex system?
Safaa Raaidi1*, Imane Bouhaddou1 , and Asmaa Benghabrit2
1LM2I Laboratory, ENSAM, Meknes, Morocco
2LMAID Laboratory, ENSMR, Rabat, Morocco
Abstract. Nowadays, industries are continually looking to implement new subsidiaries in different continents,
in order to better fulfill their customers’ needs, generate the best products in the shortest time and cheaper than
their competitors. Achieving these goals is no longer related to the company itself, but to all partners in the
supply chain. This justifies the need for efficient and judicious management of the whole supply chain, through
the collective intervention of all its actors. Needless to say, a supply chain is a system made up of a set of
suppliers, producers, subcontractors, retailers, wholesalers and customers, between whom material, information
and financial flows are exchanged. Management of these flows is becoming increasingly difficult and
constitutes the main source of the supply chain complexity. In order to alleviate this problem and improve
supply chain performance, it is necessary to model it, taking into consideration its characteristics, which make
it a complex system. Hence, the scoop of this paper is to prove that supply chain is a complex system, by
highlighting its most relevant characteristics that make it such a system. Complex means what is braided
together or woven together. If we separate the elements, we get acquaintance elements, but we lose their
interactions. Within this trend, our contribution subscribes with its ultimate purpose modelling supply chain as
complex system.
1. Introduction
Open borders to international trade or what is so-called
“free trade” proved to be one of the main companies’
issues all over the world. Industries are continually
looking to implement new subsidiaries in different
continents, in order to better fulfill their customers’
needs and requirements, generate the best products in the
shortest time and cheaper than their competitors.
Achieving these goals is no longer related to the
functions, activities and processes of the company itself,
but to all supply chain partners. This justifies the need
for efficient and judicious management of the whole
supply chain, through enhanced collaboration between
all its actors.
A supply chain is a system made up of a set of suppliers,
producers, subcontractors, wholesalers, retailers and
customers, between whom material, information and
financial flows are exchanged [1]. The management of
these flows, particularly the material and information
flows, is becoming increasingly difficult and constitutes
the main source of the supply chain complexity. In fact,
the factors of supply chain complexity have steadily
increased in the last decades, namely: the uncertainty,
the multiplicity, the variability, the size, the speed, the
diversity, etc.
As a matter of fact, nobody can deny that supply chain
management is becoming increasingly difficult, we can
even say that the supply chain can be seen as a complex
system. In fact, in order to propose an efficient and
judicious model to reduce this complexity and improve
the supply chain performance continually, our
contribution consists on showing theoretically this
axiom, in the perspective of the complex systems theory.
2. Supply chain
There is no universal definition that clarifies the global
meaning of the term “supply chain”. Some definitions
adopt a product point of view and others an "enterprise"
or "process" point of view [2]. For example, APICS
dictionary defines supply chain as: “The global network
used to deliver products and services from raw materials
to end customers through engineered flows of
information, physical distribution, and cash” [3].
According to Labarthe [4], “Supply chains constitute an
economic and social system made up of a set of inter-
acting enterprises, and implementing processes of
cooperation, coordination and negotiation in order to
ensure their efficiency and durability in satisfying the
customer demand”.
However, the literature shows that the majority of
definitions take up a certain common ideas:
 A supply chain usually refers to finished good or a
family of finished goods.
 It involves several companies, several actors.
 These companies are linked by three streams: the
information flow, physical flow and financial flows.
MATEC Web of Conferences 200, 00018 (2018) https://doi.org/10.1051/matecconf/201820000018
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 Each stakeholder performs the functions of supply,
transformation / production, distribution or sale.
 A company is potentially involved in several supply
chains. Indeed, a company generally seeks to multiply its
client-companies and its products can be used for the
development of several finished products [5].
Within each organization in a supply chain, a participant
receives demands from the prior downstream stage and
places orders with the next upstream stage to be able to
supply the downstream customer demands [6].
Furthermore, some works put more emphasis on the
purpose of a supply chain by introducing the notion of
performance, this performance being mainly
characterized by the satisfaction of the ultimate customer
[2]. So as to measure this performance, Michael H.
Hugos has pointed out in the fourth edition of his guide
“Essentials of Supply Chain Management” [7], that
companies in any supply chain must make decisions
individually and collectively regarding their actions in
five areas:
1. Production: this activity includes the creation of
master production schedules that take into account plant
capacities, workload balancing, quality control, and
equipment maintenance.
2. Inventory: the primary purpose of inventory is to act
as a buffer against uncertainty in the supply chain.
However, holding inventory can be expensive, so what
are the optimal inventory levels and recorder points?
3. Location: this activity aims to specify where
facilities for production and inventory storage should be
located, and choose then the most cost-efficient
locations. In order to determine the possible paths
available for product to flow through for delivery to the
final consumer.
4. Transportation: Airfreight and track delivery are
generally fast and reliable mode of inventory
transportation from one supply chain to another, but they
are expensive. However, shipping by sea or rail is much
less expensive but usually involves longer transit times
and more uncertainty.
5. Information: with good information, people can
make effective decisions about what to produce and how
much, about where to locate inventory, and how best to
transport it.
In the balance of this paper, we adopt the following
definition: “A supply chain is a system consisted of
many participants (suppliers, producers, distributors,
retailers, customers, etc), which collaborate, directly or
indirectly, to fulfil customer demand along the supply
chain, through three flows’ types: materiel, informational
and financial, all the while ensuring supply,
transformation, production, distribution, and sale
functions”. Figure 1 shows an example of the defined
supply chain.
Fig. 1. Example of the defined supply chain.
Nowadays, information flows do not follow this linear
form, but rather now look like a simultaneous exchange,
as shown in the Figure 2, especially through advanced
Information and Communication Techniques (ICT).
Fig. 2. The new flows distribution within supply chain
(Inspired by [1]).
2. Complex systems
2.1. Definition
In fact, there is no agreement between Scientifics in the
field of complex systems about these systems definition.
However, there is a number of definitions that contain
some similarities. According to E. Morin, who is
considered as the father of complex thinking, “Complex
comes from complexus, which means what is braided
together or woven together” [8], we cannot deduce the
overall system functioning by the addition of the
subsystems or parts that compose it, because the whole is
greater than the sum of its parts. We are therefore talking
about the central property of complex systems, which is
emergence. Mitchell defines complexity relying, in
addition to emergence, on self-organisation:” …system
that exhibits nontrivial emergent and self-organizing
behaviors" [9], that is refer to the ability of the
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components of a complex system to create organised
behaviour without an internal or external controller [10].
Of course, emergence and self-organization are not the
only characteristics of complex systems. We will explain
the remaining characteristics in Table 1.
Taking as an example of complex systems, a simple
molecule of water. We often hear that “water is life”, all
living things are mostly composed of water, that is, it
contains properties that ensure the living beings life.
However, they are found neither in the hydrogen atom
nor in the oxygen one.
Nevertheless, Ross and Ashby, both an engineer and a
mathematician, defined complexity as “the degree of a
system variety”. A system is a unit composed of
extremely diverse elements. The more varieties a system
has, the more complex it is [8], and the more it becomes
difficult even impossible to predict its behaviour.
Relying on the last example, to make this system even
more complex, for example, we use the glucose
molecule that dissolves easily in water. Considering the
chemical reaction between these two molecules, we get a
new system, with more components that are the atoms
and more interactions, which generate a more complex
system, as shown in the figure 3.
We then adopt the following definition: "A complex
system is a system composed of a set of homogeneous or
heterogeneous elements, interacting with each other in a
non-linear way, thus implementing a dynamic allowing
the whole system to exist as a whole [11].
2.2. Complex systems characteristics
Several authors (Filiz Isik, 2011), (Andreas Koch &
Laurent Larsonneur, 2008), (Gezhi Weng et al., 1999),
(Le Moigne J.L, 1999) highlight that Complex systems
are characterized by multiple properties, (Abla Chaouni
et al., 2017) grouped them in article [12], as showing in
Table 1.
Fig. 3. Chemical reaction between water H2O and glucose C6H12O6 is a complex system.
Table 1. Complex system characteristics.
Characteristic
Definition
Emergence
We talk about emergent behavior when a property appears at the global level, without it
being obvious or immediately predictable from the behavior of the elementary constituents
of the system [13].
Connectivity
Complexity results from the inter-relationship, inter-action and inter connectivity of the
elements within a system and between a system and its environment.
Co-evolution
Elements in a system can adapt based on their interactions with one another and with the
environment. Additionally, patterns of behavior can adapt over time.
Distribution control
There is not centralized control mechanism that governs system behavior. Although the
interrelationships between elements of the system produce coherence, the overall behavior
usually cannot be explained merely as the sum of individual parts.
Non-linearity
Complex systems does not conform to the principle of adding, meaning that the output is
not necessarily proportional to the input of the system
State of paradox
Complex systems have indicated dynamics combining both order and chaos. This
reinforces the idea of bounded instability or the edge of chaos that is characterized by a
state of paradox: stability and instability, competition and cooperation, order and disorder.
Far-from-equilibrium
This phenomenon illustrates how systems that are forced to explore their space of
possibilities will create different structures and new patterns of relationships.
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Heterogeneity
The system has different types of elements. The species of a rainforest, people living in
large towns, vendors in malls, structure of the mammalian brain all exhibit extreme
diversity.
Open
An open system is a system that has external interactions. Such interactions can take the
form of information, energy, or material transfers into or out of the system boundary,
depending on the discipline, which defines the concept.
Self-organization
Complex systems can change their internal structure in response to changes in their
environment; this ability allows them to survive but also to learn [13].
3. Supply chain complexity
The management of material and information flows,
along the supply chain system, is becoming
increasingly difficult and constitutes the main source of
the supply chain complexity. In fact, the supply chain
complexity factors have been steadily increasing in
recent decades, Table 2 summarizes the most
influential factors in the supply chain.
Supply chain complexity can be defined as quantitative
differences between predicted and actual states, which
are associated with uncertainty and/or variety caused
by internal and external drivers in a supply chain
system [6].
Table 2. Supply chain complexity factors.
Uncertainty
Galbraith defines uncertainty in [14], as the difference between the amount of information needed to
perform a task and the amount of information that is already available. The uncertainty sources within
supply chains are multiple, namely: uncertainty about deadlines, customer demand, processes,
markets, etc.
Multiplicity
This characteristic of the complexity covers the number of components such as items (raw,
manufactured or end), products, processes, stakeholders, relationships, interactions, goals, locations,
etc. A high number level of any components contributes increasingly complexity in a supply chain
system [6].
Variability
Consists of elements or components, which are different from each other. It represents dynamical
behaviour of a system [6].
Size
Industries are continually seeking to implement new subsidiaries in the various continents, in order to
better meet their customers’ requirements, to find new markets and new customers. As a result, supply
chain becomes more extensive, its product lines become more diversified and the number of its
processes multiplies.
Speed
The production speed is becoming higher, and product life cycles are becoming shorter, especially
with advanced information and communication technologies, which constitute one of the main
concerns for any company to survive and increase in the market.
Diversity
Related with the homogeneity or heterogeneity of a system. For example: A high level of diversity of
any components (supplier, product, mean of transport) along the supply chain leads to system’s
heterogeneity and results a high level of complexity [15].
Complexity has many negative consequences on
supply chains such as high operational costs, customer
dissatisfaction, time delay in delivery, excess inventory
or inventory shortage, lack of cooperation,
collaboration and integration among supply chain
participants, etc [6]. Confronted with such daunting
complexity, supply chain executives reported that they
face five major challenges, as shown in Figure 4 [16].
According to IBM Global Services, the most critical
challenge that has the very significant impact on supply
chain is “Supply chain visibility” with 70%, then “Risk
management” with 60%, “Increasing customer
demands” with 56%, “Cost containment” with 55%,
and ultimately “Globalization” with 43%.
All are critically important, and must be addressed
simultaneously. Together, they comprise what we call
the Chief Supply Chain Officer agenda [16].
To overcome this problem of supply chain complexity
and continuously improve its performance, it is
necessary to model it. Indeed, researchers were
proactive in the modeling of the supply chain (for
example: by multi-agent systems, the SCOR model,
mathematical models). However, our approach aims to
model it in a complex perspective, taking into account
its characteristics that make it a complex system. This
correspondence will be the subject of the following
section.
4. Supply chain as complex system
In the light of all these definitions and complex
systems’ characteristics, we will deduce that the supply
chain is a complex system, as result of taking exactly
these same characteristics. The detail of this
correspondence is summarized in Table 3.
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* Corresponding author: raaidisafaa@gmail.com
Fig. 4. Supply chain leaders wrestle with five major challenges [16].
Table 3. Supply chain as complex system.
Characteristic
Projection on supply chain
Emergence
The manufacture of a finished good, or even a semi-finished product, imperatively requires
the collaboration of several supply chain entities. Therefore, the supply chain cannot be
reduced to a single entity, but rather it is considered as a whole. For instance, when the
company makes a product, it will be beneficial to deliver it to its customer right after its
manufacture, in order to avoid the additional costs of storage. However, it is not always the
case, because the delivery time represents a compromise between the supplier and each of
its customers, who take, in turn, their customers in their decision-making process, and so
on. Hence, each entity performs its function in collaboration with the other entities, which
generates a collective behaviour.
Connectivity
Communication is one of the main keys to supply chain management. It allows obtaining
from all its actors the information and the knowledge, which will favor the course of the
current activities of the company. Especially with advanced information and
communication techniques, which ensure faster and more timely information sharing.
Co-evolution
Each peer of (client, supplier) companies co-evolves in parallel, as the supplier company
adapts its strategies and processes according to its customer requirements on the one hand,
and on the other hand according to the evolution of its environment. In the field of smart
phone manufacturing for example, it is remarkable that competition is fierce and life cycles
are becoming even shorter, because of the speed of technological development. To face
this challenge, supply chain partners must innovate continuously, and afterwards they
accept and adapt with the innovative proposals of each of them, in order to co-evolve and
survive in a hyper-competitive environment.
Distribution control
The actors of the current supply chains are geo-distributed. Therefore, supply chains
exploit remote control systems, made up of several controllers that control the subsystems
or units of the global installation. Hence, remote control systems ensure a reduction of
uncertainty and improve the entire chain performance.
Non-linearity
The non-linearity within supply chains is revealed in the activities, processes, orders, flows
and objectives of the different actors. For example, Bullwhip effect illustrates that a slight
variation in the initial state of the system, generate a significant deviation from its usual
progress.
State of paradox
To generate better quality products, the company has to invest even more and take the time
needed to control the product quality. However, the high speed of global progress requires
deliveries in the shortest possible time with optimal costs, compared to competitors. In
addition, the companies are continually seeking to find a compromise between the piloting
system by forecasts, and those by stock.
Far-from-equilibrium
Delays in delivery, stakeouts, unexpected breakdowns, fluctuations in demand, etc, are the
main sources of imbalance in the supply chain.
Heterogeneity
The supply chain is composed of several participants (suppliers, factories, warehouses,
distributors, wholesalers, etc.), concerns different types of products, relies on several
functions, and uses different processes according to each actor activities.
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Open
Supply chain is an open system that constantly interacts with its environment, it is often
found that an actor is part of several supply chains, on the other hand, the supply chain
involves several suppliers, producers, warehouses, distributors, wholesalers, etc.
Self-organization
Supply chain actors can modify their internal strategies in response to the market changes
and its dynamism, to survive in the market and to ensure customer satisfaction. Sometimes
suppliers fail to deliver the products at the right time, or the quantity delivered is not
always of good quality. Then the company must manage this problem in order to ensure its
customer’s satisfaction, by providing a stock of risk management even if it can be
expensive for her (hybrid strategy). Thus, the company self-organizes in front of the
market dynamism.
5. Conclusion
The globalization of markets and the opening of
borders have greatly complicated the supply chain
management. Good management of supply chain
complexity has become the major concern of any
company, in order to remain competitive in the market
and better meet its customer’s needs.
In this context, our contribution objective is to integrate
the two scientific disciplines: that of Supply chain
management with the Complex systems field. In this
article, we presented a literary overview on the supply
chains, explaining its different actors, flows and the
main sources of its complexity that hinder its
improvement. Then, we have showed a state of art of
complex systems, and we have explained all of its
characteristics, in order to, theoretically, justify that the
supply chain is indeed a complex system because it
takes exactly the same characteristics.
As we have already mentioned, to manage the supply
chain complexity, it is necessary to model it in a
complex perspective, which will be the subject of our
next contribution.
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