Latest Technology Brings Unwanted Chaos To Company Stock Controls And Supply Chains

November 28, 1997

The latest computerised stock control systems are quite literally causing chaos in company supply chains according to new research just published by Richard Wilding at the Warwick Manufacturing Group at the University of Warwick. His new research shows how some of the latest computerised inventory control systems, commonly used in industry, can actually lead to stock control systems demonstrating many of the problems predicted by chaos theory.

Mathematicians use chaos theory to describe systems that seem to move at random, even though they are based on fixed rules that in themselves involve no element of chance. While the system is apparently stable and predictable, in practice it may be extremely sensitive to small changes.

These advanced stock control systems attempt complex predictions of future stock needs but fail to cope with the chaos that can be caused by small human errors, or short term market fluctuations. Even if the level of customer demand is fixed at a certain level, the chaos that can be created by the latest stock control systems can make it virtually impossible for manufacturers to forecast requirements and can raise total supply chain costs for companies by up to 500%. This comes on top of recent research from America which demonstrated that 25% of managers create chaos through their decision making behaviour. Richard Wilding said:-

Increasingly complicated analysis and control systems are being produced to aid the management of the supply chain. These systems could actually be the cause of the uncertainty experienced by managers. Simple lean approaches are the key to beating this problem, so think twice before investing in complex software"

His research finds that supply chain managers could be faced with dramatic and unexpected changes caused by computerised inventory control systems rather than changing customer demand. This means that short-term forecasting is likely to prove more effective than long term planning, but if long term plans are made they should reviewed regularly. The research concludes that managers can reduce chaos by focusing on the customer and communicating demand information as far upstream as possible.
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University of Warwick
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