Supply Chain Complexity Can Be a Good Thing

Conventional wisdom holds that to reduce risk, supply chains should also reduce supply chain complexity. Yet a new study out of Penn State is claiming that in the case of cities, complex and diverse supply chains can be a boon. To bolster their argument, a team of engineering academics at the school developed an algorithm to analyze the impact of two aspects of supply chain complexity. This included the diversity of sources required, and the volume of that product coming into a city. The team then applied machine learning to the equation and used it to identify patterns that can predict the risk of supply chain shortages. The results pointed to the idea that diversity increases complexity and that in nature, this is a good thing. The team argued that many species can make for a less vulnerable ecosystem, and that the same applies to the supply chain.

The Supply Chain Complexity Study

When using the approach with cities and their supply chains, the Penn State team found that the benefits of diversity best serve medium-sized cities, those with a population between 100,000 and 500,000. Larger cities, such as New York and Chicago, already have less dependency on specific supply chain partners, and thus can better sustain supply chain interruptions. The medium-sized cities, by comparison, have a lack of diversity in their sourcing, and therefore suffer more when there’s disruption. The next step in the team’s research is to model the data from more cities over a longer period. This will include both pre- and post-pandemic years. In the meantime, perhaps it’s time to rethink conventional wisdom on supply chain complexity.