Perspectives on Various Issues of Interest

The SOTP Sign

Adaptive Behavior in Supply Network

We observe several examples in supply networks where adaptive behavior resulted in superior performance. Consider the different approaches that Nokia and Ericsson took when a fire disrupted the supply from Philips, the sole supplier for a particular chip common to both manufacturers. While Ericsson suffered an estimated $2.34 billion loss, Nokia engaged directly with Philips to restore supply using alternate supply options. They modified designs of the handsets where possible and secured worldwide manufacturing capacity from Philips to ensure a steady supply of the chips. Meanwhile, the direct interaction between top management of Nokia and Philips further enhanced the ability of Nokia to adapt in the future. Similarly, Honda adapted to the changing automotive sector environment by leveraging the notions of learning and path dependency of adaptive systems. They used their Accord and Civic platforms as the basis of several of their most recent sport utility vehicles, and, as a result, they gained significant market share in that segment even though they were slow to enter the four-wheel-drive market.

 

Source: Pathak, S., Day, J. M., Nair, A., Sawaya, W., and Kristal, M. 2007. Complexity and Adaptivity in Supply Networks: Building Supply Network Theory Using a Complex Adaptive Systems Perspective. Decision Sciences Journal, Vol. 38, Iss. 4., 547-580.