Systemic approach to supply chain management through the viable system model and the theory of constraints

Abstract

In today’s environment, Supply Chain Management (SCM) takes a key role in business strategy. A major challenge is achieving high customer service level under a reasonable operating expense and investment. The traditional approach to SCM, based on local optimisation, is a proven cause of meaningful inefficiencies – e.g. the Bullwhip Effect – that obstruct the throughput. The systemic (holistic) approach, based on global optimisation, has been shown to perform significantly better. Nevertheless, it is not widely expanded, since the implementation of an efficient solution requires a suitable scheme. Under these circumstances, this paper proposes an integrative framework for supply chain collaboration aimed at increasing its efficiency. This is based on the combined application of the Beer’s Viable System Model (VSM) and the Goldratt’s Theory of Constraints (TOC). VSM defines the systemic structure of the supply chain and orchestrates the collaboration, while TOC implements the systemic behaviour – i.e. integrate processes – and define performance measures. To support this proposal, we detail its application to the widely used Beer Game scenario. In addition, we discuss its implementation in real supply chains, highlighting the key points that must be considered.