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Fields of action in complexity management
Designing complexity management in line with the times
How can product variants be cleverly substituted? How can an intelligent pricing policy improve the margin? And how can the portfolio become more resilient to external influences? These are some of the complex tasks that manufacturing companies need to solve in order to be successful.
Complexity is reflected in the products, processes and structures of companies. It is a side effect of growth and – if you like – of the company’s success. Successful companies open up markets and can respond to the diverse needs of their customers in a differentiated way with their portfolio of products and services. It can therefore be argued that a necessary degree of complexity is a prerequisite for a company’s success. The decisive factor is how companies deal with their complexity; whether they are able to master their complexity efficiently. The correct handling of complexity is therefore an important success factor for companies.
Complexity is an undesirable consequence of variant diversity.
Dr.-Ing Kai P. Bauer, Senior Manager Supply Chain Management
Complexity management is a method used in manufacturing companies to understand, control, reduce and prevent complexity. The method and its principles are not new: the method has been used and further developed for more than three decades. In our view, the question is therefore not whether complexity management should be applied, but how manufacturing companies can design complexity management in a contemporary way.
Complexity management in multi-variant production
Variety and complexity
Let’s start with a seemingly simple question: is a high level of variant diversity good or bad? The answer depends on who you ask. On the one hand, diverse products and variants open up new sales potential. On the other hand, variant diversity also generates complexity costs, e.g. through additional personnel expenses or storage and production capacities.
These two facts are the reason why many companies have a high level of product and variant diversity – often even increasing it further – and at the same time are constantly striving to control and reduce this diversity. The methodical handling of this diversity is the subject of complexity management.
It is important to understand the difference between complicated and complex: a complicated system consists of many elements and requires a high level of specialist knowledge to understand. However, it has been designed by technical experts in such a way that it can be controlled according to simple rules. A car is an everyday example of a complicated system. A complex system, on the other hand, is not fully understood in its functional relationships. Unwanted side effects and interactions can occur. A better understanding of the internal and external relationships can transform a complex system into a complicated one. Unwanted system reactions are avoided; the system becomes controllable.
An important goal of complexity management is therefore to make the functional relationships within the product portfolio and operations visible and understandable for the user. At the same time, it is clear that sets of rules and heuristics are not enough to fully master complexity.
Complexity management is a multi-layered process involving different interest groups.
Dr.-Ing Kai P. Bauer, Senior Manager Supply Chain Management
Participants and levels in complexity management
The effects of a high level of product and variant diversity can be felt in many areas of a manufacturing company: in development, procurement, production and logistics. In the processes and structures. And in the systems and data.
This is why many functional areas are involved in complexity management in manufacturing companies. Each of these areas has its own perspective. The aim of complexity management is to balance these different interests.
Complexity management is a systematic and continuous process involving many functional areas that works on three time levels:
- Today: Understanding and reducing existing complexity (operational)
- Tomorrow: Recognizing the complexity necessary for success and handling it efficiently (tactically)
- Future: Preventive avoidance of complexity that is not necessary for success (strategic)
Good decisions in complexity management are fact-based, product-related and balanced.
Dr.-Ing Kai P. Bauer, Senior Manager Supply Chain Management
Four fields of action in complexity management
In order to be able to act on these three levels of complexity management, various fields of action in complexity management must be addressed.
Field of action 1: Analysis
Analysis is the first step in understanding the complexity of a company. Its importance for the quality of decisions should not be underestimated. For this reason, manufacturing companies should carry out an intensive analysis of their product diversity. This includes parts lists, configuration parameters and rules, purchasing and sales documents, inventory data and numerous master data on materials, suppliers and customers. The aim is to identify and quantify similarities, correlations and dependencies in the portfolio as well as with suppliers and customers.
Field of action 2: Portfolio management
Portfolio management pursues two goals: the short-term reduction of existing complexity and, in the short to medium term, the recognition of the complexity necessary for success and its efficient handling. This requires manufacturing companies to develop differentiated rules and data-based success patterns that can be used to manage the portfolio and shape processes, structures, pricing policy, etc.
In this way, costs in purchasing, development, production and after sales can be reduced through lower complexity and bundling effects in purchasing and production can be achieved through reduced component diversity.
Field of action 3: Product design and change management
Manufacturing companies should make product design and production processes simpler and more efficient in the medium to long term. This can include the reduction of product variants, the standardization of components, the optimization of production processes or the use of modular designs.
A structured approach to change management is also required. Changes to products, product variants or production processes should be carefully planned, documented and communicated. Effective change management helps to control complexity and avoid uncontrolled changes.
Field of action 4: Employee involvement
Good decisions can only be developed through careful consideration of all interest groups in the company. The involvement of all relevant stakeholders in the decision-making process is therefore a continuous requirement for complexity management. It is necessary to provide all decision-relevant information on the same database, individually prepared, and to ensure a continuous flow of communication between all parties involved.
Dr.-Ing. Kai Philipp Bauer
Senior Manager, Hamburg
Kai Philipp Bauer studied mechanical engineering with a focus on production technology and has been working in consulting for over 15 years. He advises his clients in particular on issues relating to strategy development, operations management and digital transformation.
Dr. Clemens Wolf
Manager Digital Operations, Frankfurt
He is responsible for the Digital Operations business area at Rothbaum. His goal is to drive digitalization forward with our customers from the manufacturing industry and to support operations with modern technologies and system solutions.
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