Analyzing supply chain processes using systems thinking

- "For every complex problem, there's an answer that is clear, simple, and wrong." That quote from writer HL Mencken reminds us that we're taught to think about the world in terms of simple cause and effect. We expect that the future will resemble the past and that small changes should not have a big impact. That sort of linear thinking can be very useful, but it has limits. Systems thinking involves analyzing an entire supply chain as a system rather than just looking at the individual parts. In this video, we'll see why we need to apply systems thinking in order to understand the behavior of supply chains. Supply chains are much more complex than many people realize. To start with, they aren't chains at all. They're complex networks, systems with many interactions and dependencies. Things can change quickly and small changes can have huge impacts. If Two Trees Olive Oil is experiencing delays in its supply chain, a systems thinking approach would try to identify the root cause of the delays and would also consider the potential impact on other parts of the supply chain. In order to truly understand what's causing the delays, they might need to look at a range of factors like the availability of raw materials, the efficiency of their manufacturing process, and the reliability of their transportation and logistics. We need to use systems thinking to understand the entire process of getting a product from the manufacturer to the customer. Two Trees Olive Oil needs to think about how the weather will impact their harvest and how that will ultimately affect their manufacturing and transportation needs. When we analyze a supply chain, we often look at the flow of materials and information from suppliers to the manufacturer. The logistics of getting the finished product to warehouses and distribution centers, and the processes for fulfilling orders and delivering products to customers. That sort of complexity requires us to use systems thinking. Let's say that Two Trees Olive Oil is facing an increase in the price of their raw materials. They could simply increase the price they charge customers, but they would also want to look at how that price increase would lower customer demand and reduce their revenue. In other words, if they respond to a cost increase by raising their prices, they might actually reduce their profitability even more. When we think about the supply chain as a system, we can develop better strategies to improve our overall efficiency and effectiveness. This might include implementing new technologies, improving communication and coordination among different parts of the supply chain, and identifying opportunities for collaboration and partnership.