Infosys Insights: The complexity paradox

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Entropy can only remain constant or increase over time – according to the second law of thermodynamics. Similarly, the laws of physics govern businesses too. This means when you try to reduce complexity within your own company, you will certainly end up increasing complexity for someone else if not for yourself. It is important to pay close attention to where complexity is going, particularly supply chain complexity.

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Infosys Insights: The complexity paradox

  1. 1. - Dr. Martin Lockstrom The Complexity Paradox INSIGHTS
  2. 2. © 2013 Infosys Limited, Bangalore, India. All Rights Reserved. Infosys believes the information in this document is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of other companies to the trademarks, product names and such other intellectual property rights mentioned in this document. Except as expressly permitted, neither this documentation nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, printing, photocopying, recording or otherwise, without the prior permission of Infosys Limited and/ or any named intellectual property rights holders under this document. About Infosys Infosys is a global leader in consulting, technology and outsourcing solutions. As a proven partner focused on building tomorrow’s enterprise, Infosys enables clients in more than 30 countries to outperform the competition and stay ahead of the innovation curve. Ranked in the top tier of Forbes’ 100 most innovative companies, Infosys – with $7.4B in annual revenues and 155,000+ employees – provides enterprises with strategic insights on what lies ahead. We help enterprises transform and thrive in a changing world through strategic consulting, operational leadership and the co-creation of breakthrough solutions, including those in mobility, sustainability, big data and cloud computing. Visit www.infosys.com to see how Infosys (NYSE: INFY) is Building Tomorrow’s Enterprise® today. For more information, contact askus@infosys.com www.infosys.com Author Profile Dr. Martin Lockstrom Principal Consultant, Building Tomorrow’s Enterprise, Infosys Labs Martin is a specialist in Supply Chain and Operations Strategy, Outsourcing/Offshoring and International Management. During a six-year stint in China, he established the research and education activities at the SCM, Sustainability and Automotive academic centers at China Europe International Business School, Shanghai. He established the first endowed chair for Purchasing and SCM in China at Tongji University, Shanghai, and was also responsible for setting up Supply Chain Management Institute China, an international network of SCM research and education hubs. Martin co-founded Procuris Solutions, an IT company specializing in SCM-related solutions, offering consulting services to companies like Accenture, Ariba, BMW, Clariant, Dell, Dow, Ernst & Young and Intel, among others. He has a Ph.D. in Supply Chain Management from European Business School, Germany, a bachelor’s and master’s degree in Industrial Engineering and Management, from Chalmers University of Technology, Sweden. He speaks Swedish, English, German and Chinese, has published over 50 articles and papers and presented at more than 60 conferences. There’s an inherent paradox in business complexity: You’ll never be able to reduce or eliminate it from an overall perspective. Why? Read on. Complexity is a phenomenon, which is closely related to the concept of entropy in physics. According to the second law of thermodynamics, it can only remain constant or increase over time. Since the laws of physics govern businesses too, this essentially means that when you try to reduce complexity within your own company, it’s a certainty that you will increase complexity for someone else if not for yourself. It’s the same as when you clean your house. The dust and garbage don’t disappear altogether, but instead end up somewhere else – on the street or the local landfill. Hence, when reducing complexity, one has to pay close attention to where the complexity is going. As we all know, a supply chain can never be stronger than its weakest link, so you definitely don’t want complexity to end up at your suppliers or distributors as this will eventually backfire. Take the classic example of companies that try to improve their working capital situation by extending account payable terms with suppliers, which in turn worsens the working capital structure of the latter, which they compensate by raising prices. To sum up, this means that entropy cannot be eliminated, but should ideally be passed on to someone else of less importance, such as one’s competitors, if possible!

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