There is a movement in supply chain consutling, driven by good results in some industry settings, for corporate strategy to explicitely choose to reduce complexity in their enterprises: reduce their number of SKUs, reduce the markets they participate in, reduce their number of vendors, even reduce their customer count!
Why? Because many enterprises cannot manage complexity - and most often, explicitely in supply chain. Recently Dan Gilmore at Supply Chain Digest, catalogs some of the basis of the 'War on Supply Chain Complexity'.
We grant that there have been some successes in some markets by taking this approach, but without being flippant about it, manufacturing low SKU count products represents only a small portion of the supply chain industry. For many manufacturers and most distributors and participants in industry markets like Life Sciences - complexity is an unavoidable fact of business. Just is.
Many e-commerce enterprises today feature niche market channels, low volume customers as the bread and butter of their operations. You've heard of Amazon right?
Extremely targeted customer interest, discovering market demand. brand and SKU proliferation characterize continued competition for customers and it's only going to get more extreme.
We have some customers who have millions of SKUs. Are you going to tell a drug manufacturer, whose R&D actitivies require millions of potential chemical combinations for their next great design to reduce complexity? We don't think so.
Really, there's more than once choice - an enterprise can choose to reduce complexity and achieve better, stable profitabliity in a down or sideways market - or they can embrace complexity: find the needs and fill them to achieve growth and profitablity for any planning horizon.
It is possible to master complexity. We know that it is. And the rewards for such mastery are what can separate you from those who approach the same markets you are in defensively.
