Increasing complexity is the biggest challenge for the supply chain. Learn more about how complexity impacts the supply chain and how to eliminate or reduce this complexity.

1. Supply Chain Complexity
The growing challenge for performance

2. Wilson Perumal & Company, Inc. 2
Why isn’t it getting any easier?
[2013] Garment factory tragedy directly impacts a
number of multi-nationals including Wal-Mart Stores Inc.,
Sears Holding Co. and The Walt Disney company.
“Never has so much technology and brainpower been applied to improving supply
chain performance… nonetheless, the performance of many supply chains has
never been worse.” -- Prof. Marshal Fisher (Harvard Business Review)
1997
[2014/2015] Reuters reports on more 787 production
problems which Boeing refers to as “output hiccups”.
Noted are “unusual shifts” in the company’s supply chain.
[2012] Best Buy’s much-publicized failure to fulfill many
online orders in time for Christmas exposed ongoing problems
that hadn’t been resolved. Critics suggest “avoid them”.

3. Wilson Perumal & Company, Inc. 3
Increasing complexity is the biggest challenge for the
supply chain
• Input cost volatility
• Shifting sources
• Evolving environmental &
safety regulations
• Higher customer expectations
• Shorter product life-cycles
• Business model &
technological disruption
• Global supply bases
• Increasing suppliers and
partners
• “Right” shoring
• Omni channel fulfillment
• Additional technology
investments
• Growing customer centricity
• Delayed integrations
• Tighter inventory policies
• Increasingly extended
networks
• Increasingly opaque org
structures &
• Need to manage through
multiple cultures
• Decreased clarity of direct
and indirect costs
• Need for continuous change
management
Supply chains are growing increasingly complex making them harder to manage,
operate, and change in response to customer, competitive, and financial shifts
A changing world
Typical responses
Resulting Complexity
• Greater number of variables
• Infinite ways to fail

4. Wilson Perumal & Company, Inc. 4
What does complexity in the supply chain look like?
Increasing numbers of
suppliers, products &
components to source and plan
Prod
Mfg
Whse
Field
Expanding networks,
product flow alternatives,
and processes
Increasing numbers of
geographies, markets, channels,
and customers to serve
Distrib
B2B
B2C
North
America
Supplier
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k)x x x x x x x x x x
Sources of Complexity (simplified!)

5. Wilson Perumal & Company, Inc. 5
The impact of too much complexity is higher cost,
lower performance, and inability to grow
Level of complexity
you can support
Complexity counters economies of
scale and dampens profitability
Returns
Cost (and Risk)$
Complexity
An increasing number
of companies
Complexity makes ongoing performance
and growth increasingly difficult
Complexity
increases
Poor
execution
Loss of
process
control
Poor
business
results
More people
and
processes • Shortages
• Breakdowns
• Missed deliveries
• Accidents
$
Companies cannot outgrow complexity; nor do traditional cost containment or
process improvement approaches work
Increasing SKUs, facilities, processes…

6. Wilson Perumal & Company, Inc.
Source: Stephen A. Wilson, Mike George. Conquering Complexity (New York McGraw-Hill, 2004)
The case for reducing complexity is compelling
6
“Complexity can drive down
quality, increase costs and
lengthen lead times. Any
complexity that is not being
valued in the marketplace takes
away from my capacity. If that’s
the state you’re in, you have poor
execution-and you can’t innovate
your way out of poor execution.”
- Consumer Electronics VP
Select Metrics Y1 Y2 Y3
Portfolio (#) 3500 2079 499
Product Development projects 120 22 20
New products introduced 0 8 14
On-time delivery 70% 78% 90%
Cust. Satisfaction 27% 55% 90%
Mfg. productivity 1x 2.2x 3.1x
Operating Earnings -6% 3% 7%
Sales 100 125 240
Complexity and business performance are inextricably linked. The benefits of
simplification extend across all aspects of the enterprise.

7. Wilson Perumal & Company, Inc.
Addressing complexity requires an understanding of
its drivers
Organization
Value add
Non-value add
The Complexity Cube
Complexity (good and bad) exists along the edges of the Complexity Cube, while the cost of
complexity reveals itself on the faces and within. Cost and risk grows geometrically with
complexity
Number of
products and
services you offer
Number of organization, facilities,
assets, and systems you employ
Number of programs,
processes, steps, and
handoffs you execute
7
Identifying and understanding the impact of complexity focuses efforts
…and prevents you from improving what you should not be doing

8. Wilson Perumal & Company, Inc. 8
Evidence of complexity is found throughout the supply
chain and is sometimes masked as a “local” issue
Companies need to understand the difference between the drivers and the
symptoms of complexity
Source
Complexity can easily be the root cause of ongoing poor performance and why initiatives like
process improvement and new technology do not yield the expected benefits
↑ Lead-time
↑ Cost
↓ Utilization
↓ Availability
Complexity via
• Product
• Process
• Organization
Plan Make Move
• Late deliveries
• Routine expediting
• High overtime
• Poor space utilization
• High accident rate
• Diminished leverage
• Inconsistent supply
• Rogue buying
• Disparate contracts/SLAs
• Poor part quality
• Schedule misses
• Inconsistent quality
• Increased changeovers
• Poor asset utilization
• High scrap
• High forecast error
• Obsolescence
• Line shortages
• Poor availability
• Routine expediting

9. Wilson Perumal & Company, Inc.
An often unforeseen impact of complexity is how it
diminishes a company’s ability to compete overall
Much of the value a company delivers to its customers and shareholders is enabled through
cross-functional processes which complexity can significantly hamper
When products or services along with processes cross functional lines, the impact
of complexity results in ambiguity (who), loss of context (why), and latency (when)
Too many
products,
processes, and
organizational
elements…
…can make it
hard to deliver
on what may
matter the most
for success

10. Wilson Perumal & Company, Inc. 10
Fortunately, there is a common approach for reducing
complexity and sustaining performance
Diagnose
Complexity
Attack
Complexity
Sustain
Results
Identify and diagnose the sources and impacts of
complexity. Understand the size of the prize and plan the
journey.
Reduce the amount of complexity AND make it less
expensive to deliver. Simplify product, process and
organization interactions.
Develop and drive the management systems and
culture to sustain operations excellence. Control
complexity going forward.

11. © Wilson Perumal & Company, Inc.
Product-related complexity drivers
• Numbers of SKUs and components
• Configurations and packaging options
• Special conversion/handling requirements
• Supply market challenges
• Safety/environmental hazards
Understanding complexity drives the right set of
actions and focus for improvement
11
Organization
Value add
Non-value add
Organization-related complexity drivers
• Geographic service area
• Number of locations (operations, support)
• Number of organizations
• Offshore and outsourcing models
• Competency requirements
Process-related complexity drivers
• Multiple or unique customer requirements
• Local regulatory and compliance needs
• Differing (lack of) service level policies
• Too many suppliers and/or partners
• Uncommon objectives and metrics
Sample actions
 Portfolio rationalization
 Supplier consolidation
 Product simplification
Sample actions
 Network optimization
 Operating model reengineering
 Portfolio rationalization
Sample actions
 Service optimization
 Process & technology standardization
 Operational excellence

12. Wilson Perumal & Company, Inc.
Examples of how this approach gets applied
12
• Reduced SKU count by 75%
• Reduced distribution depots from 18 to 5
• Reduced production factories by 15%
• 10% increase in margins
• 7% revenue growth on a like-for-
like basis
Product & Org Process & Org
• Aligned production with geographic market
• Reduced SKUs produced per plant by 50%
• Replaced 3-touch with 1-touch distribution
$15M+ in benefits realized
Product & Process
“ the top-down approach gave us insights into
our operating model. The insights are
phenomenal!”
—President Land o’ Lakes Feed
• New cross-function and cross-mission KPIs
• Streamlined processes, decisions and roles
• Common principles to drive decision-making
$140M+ in benefits realized
“…the best understanding of the ammo
logistics base I have seen…I for one have been
waiting for this for years”
--Depot Commander
“…our thinking is more joined-up and
there is a more coordinated focus on
revenue and margin growth” - CEO
Consumer goods Agribusiness Government

13. Wilson Perumal & Company, Inc. 13
A few final thoughts…
• Complexity is the enemy of an efficient supply chain
• As complexity increases, the value of scale decreases
• The answer to complexity is not adding more complexity
• Attacking the right complexity drivers yields more effective
and sustainable improvement

14. Wilson Perumal & Company, Inc. 14
There are multiple ways we get started depending on
organizational alignment and clarity of issues
Build the case
for action
Identify the
Right Levers
Eliminate bad complexity /
Reduce cost to deliver good complexity
Procure
Plan
Mfg
Distribute
Strategy
Supplier Rationalization
Part Reduction
S&OP
Out-of-Stock Reduction
Operational Excellence
Inventory Optimization
Order-to-Cash
Supply Chain Strategy
Production Optimization
Op Model/Organization
In/Out- Sourcing
Service Optimization
Operations Excellence
SRM
Plan-to-Produce
Procure-to-Pay“Business Simplification”
“Imperative for Growth”
“Cost Reduction”
“Reducing Risk” Operations Excellence
Customer Profitability
Cost to Serve
Business Standardization
Time to Market/Innovation
Portfolio Optimization
Network Design SC Operating Model
Cat. Mgmt
Transportation Optimization DC Ops
Issue-to-Resolution
Workshops Assessments Programs & Projects

15. Wilson Perumal & Company, Inc.
North America Europe
Two Galleria Tower
13455 Noel Road, Suite 1000
Dallas, TX 75240
+1 972-716-3930
Longcroft House
2/8 Victoria Avenue
London, EC2M 4NS
+44 (0)203 206 1496
Contact Us:
www.wilsonperumal.com
Contact@wilsonperumal.com