A System of Systems Approach for Global Supply Chain

Management in the Big Data Era1

Tsan-Ming Choi2
Business Division, Institute of Textiles and Clothing, The Hong Kong Polytechnic University,
Hung Hom, Kowloon, Hong Kong.

First version: 15 September 2017; revised: 18 October 2017; accepted: 31 October 2017.
Forthcoming in IEEE Engineering Management Review.

Abstract: Global supply chain management (GSCM) is increasingly complex and managers find that traditional
methods fall short in adequately addressing many associated challenges. As such, it calls for innovative
managerial measures. In this paper, we discuss how the system of systems (SoS) approach and big data
technologies can be applied to improve GSCM. We first show that the global supply chain is an SoS and
examine various principles of the SoS approach. Then, we review various big data related technologies which
are commonly employed in global supply chain management. After that, we propose how big data related
technologies can be incorporated into the SoS approach to enhance global supply chain operations by presenting
an example. This paper provides practitioners a new perspective on how big data related technologies can be
used for global supply chain management with an SoS mindset.

Key Words: Global supply chain management, system of systems theory, big data, practitioners, managerial
insights, action matrix.

INTRODUCTION
The business world is getting more and more globalized and proper management of global supply
chains is a crucial topic of engineering management. In all kinds of industries, including products and
services, global supply chain management (GSCM) is supported by information technologies. For
example, in typical manufacturing supply chains of a substantial scale, producers have to source all
around the world for components and materials, and produce in the developing countries where the
labour cost is low. However, as the global supply chain (GSC) includes many geographically dispersed
companies, proper control and coordination among different supply chain members are crucial yet

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The author sincerely thanks the editor-in-chief Professor Joseph Sarkis for his kind invitation, support and comments
for the development of this paper. He is also grateful for the comments by an anonymous reviewer, and his PhD students
Ya-Jun Cai and Elaine Fung on an earlier draft of this paper.
2
Corresponding author: Tel.: (852) 27666450, Fax: (852) 27731432, Email: jason.choi@polyu.edu.hk
challenging. Technologies such as electronic data interchange (EDI) and enterprise resource planning
(ERP) systems have become the “industrial norm” for GSCM.
With the further development of technologies, the GSC has entered the big data era in which
supply chain members possess a massive amount of highly unstructured data (Richey et al. 2016). The
data usually has a high variety and requires very speedy processing. How to maximize the benefit of
the big data, especially for GSCM, becomes a critical issue.
Among different systems management principles and methods in the literature, the system of
systems theory would fit very well to the management of GSCs owing to their very complex,
decentralized and dynamic nature. In fact, a system of systems (SoS) refers to a large scale distributed
system in which its components are also complex and independent systems themselves (Choi 2016).
In many cases, the component systems are stand-alone systems and they work together to form the
SoS in order to create a new function or achieve a certain goal (Goroh et al. 2008; Tannahill and
Jamshidi 2014), which resembles the case of GSCs.
To be qualified as an SoS, the system must satisfy some common qualifying “principal criteria”,
namely the operational independence of component systems, managerial independence of component
systems, evolutionary development, emergent behavior, and geographic distribution. Notice that these
five criteria are commonly known as the Maier’s criteria (Maier 1998) and are standard in determining
if a system is qualified as an SoS. After a quick checking, it is obvious that a GSC is a typical SoS
because it well-satisfies these five qualifying criteria as shown in Table 1.
Table 1. The qualifying criteria for SoS – Maier’s criteria
QUALIFYING CRITERIA A GLOBAL SUPPLY CHAIN
Operational independence of Each member of the GSC can operate independently as an independent unit.
component systems
Managerial independence of Each member of the GSC is self-contained. It can manager itself and run
component systems independently.
Evolutionary development A GSC is not static. It develops continuously.
Emergent behavior A GSC achieves the functions not attainable by its individual supply chain
members separately.
Geographic distribution Members of a GSC are usually located in different places.

Observe that not all supply chains are qualified to be systems of systems. For example, a small
supply chain which only operates in a local market is just a traditional system. In systems engineering
(Madni and Sievers 2014), the large SoS and the traditional small system are different in a number of
ways. Table 2 shows a simple comparison between the two types of systems, which are commonly
observed in practice.
As the GSC is naturally an SoS, we can develop our operational strategies and measures to
enhance GSCM by using many principles in SoS, i.e. adopting the SoS approach.

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 Table 2. A traditional system versus an SoS
TRADITIONAL SYSTEM
Component systems (called subsystems) usually have
limited ability and autonomy.
Centralized control is usually feasible.
Subsytems are usually located in nearby places or in
the same market.
The system faces less uncertainty.
Subsystems are usually similar.
The system’s structure is usually well-defined and
rather static.
SYSTEM OF SYSTEMS
Component systems are independent operationally and
managerially
Centralized control is very difficult to achieve and most
operations are under a decentralized mode. Thus, no unit
in the SoS can dictate and control all component systems.
Component systems are located in geographically
dispersed locations.
The system faces multiple sources of uncertainties coming
from individual component systems.
Component systems are usually very different and no
single measure can easily be applicable to all of them.
The system’s structure is highly dynamic and evolves over
time.

THE SOS APPROACH

In this section, we present the SoS approach. We want to illustrate how members of a GSC can improve
GSCM by adopting an SoS approach3.
As we mentioned above, the SoS is different from the traditional system in a number of ways (see
Table 2). Thus, managing an SoS requires different managerial mindsets and principles. To be specific,
the following shows a list of key SoS principles coming from the SoS approach4:
1. Objective: In terms of decision making, an SoS usually cannot achieve the globally optimal
decision for the whole SoS (Gorod et al. 2008). As such, we are usually satisfied by having a
satisficing (i.e. “good enough”) optimization objective. However, it is still challenging as
individual component systems of an SoS have their own objectives and incentives. In a GSC, it is
hence critical to properly align the incentives among individual members as much as possible to
the most important common objective of the SoS.
2. Control: A small system can achieve a centralized control easily but not an SoS. In an SoS,
members are geographically located in dispersed places and they are usually highly different, i.e.
heterogeneous. As a result, an SoS is so complicated and big that it has to be decentralized and it
is simply impossible to achieve a fully centralized control (Rechtin 1991; Madni and Sievers 2014).
In this situation, the best possible action is try to find a way so that the decentralized component
members will be willing to contribute to some common goals of the GSC SoS.
3. Structure: An SoS is dynamic in its structure (Madni and Sievers 2014). It is hence very important
to properly select the right supply chain partners and related technological applications to ensure

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Here, the SoS approach refers to the adoption of various SoS principles in analyzing the problems.
4
Notice that these five principles are selected because they are well-established and can be used for GSCM.

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 that smooth GSC operations can be achieved dynamically with respect to the updated market states.
If a GSC member (e.g., a manufacturer) is weak, the other members should consider either helping
it to develop or changing members under the triage policy in the SoS theory (Choi and Shen 2016).
4. Uncertainty: An SoS faces multiple sources of uncertainty because of its large size and scope (Choi
and Shen 2016). In a GSC SoS, if we consider every geographically dispersed member as a
component system, it alone already has to deal with a number of uncertainties in supply and
demand. Considering all GSC members together as an SoS, it will be open to a high level of risk
and a lot of probable disruptions because of uncertainties. This calls for proper risk management
schemes in the GSC to deal with them.
5. Interfaces: It is commonly known in the SoS literature that the interfaces between component
systems are critical areas (Madni and Sievers 2014; Choi 2016). A failure to properly manage these
interfaces will lead to SoS integration failures and result in severe losses. In GSCM, the interfaces
are usually supported by technologies and business process integrations, and special attention
should be paid to them.
Table 3 summarizes the critical principles of adopting the SoS approach for GSCM.

Table 3. Critical principles when adopting the SoS approach for GSCM
AREAS CRITICAL PRINCIPLES IN THE SOS APPROACH
Objective Properly aligning the incentives among individual members of the GSC to the most important SoS’
common objective is critical.
Control Finding a method so that the decentralized supply chain members will be willing to contribute to some
common goals of the GSC SoS.
Structure 1. Selecting the right supply chain partners and related technological applications to support the GSC
operations with respect to the updated market states dynamically.
2. Restructuring and removing the weak link if needed.
Uncertainty The GSC SoS faces uncertainties and proper risk management schemes in the global are essential.
Interfaces Paying special attention to the interfaces between individual members in the GSC SoS.

BIG DATA RELATED TECHNOLOGIES FOR GSCM

To support the implementation of the SoS approach for GSCM, we need the use of information
technology. In fact, big data related technologies, mainly related to sensors, storage, processing and
networks technologies, play a crucial role in modern GSCM. In the following, we examine a few
representative related technological advances and applications.

1. Information and communication technology (ICT): ICT focuses on the integration of

communication networks, software and hardware so as to achieve a unified communication scheme
to facilitate the access, storage, transmission and manipulation of data. It is the major driving force
for the recent economic development in recent decades (Tsilipanos et al. 2015). In GSCM, ICT is
critical to help improve integration and coordination among supply chain members. ICT also

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 enhances supply chain visibility and facilitates the automation of many business processes in GSCs
such as e-logistics and e-procurement. In a GSC, ICT naturally generates a lot of data which can
support GSCM.

2. Enterprise resource planning (ERP) systems: An ERP system is a firm-wide system which helps
support the major business processes within the enterprise, and provides functionality to support
connections with parties (e.g., vendors and customers) outside the enterprise. All ERP systems
have a centralized database and proper data management is crucial. Nowadays, most well-
established enterprises should have already implemented their own ERP systems and companies
like SAP and Oracle are industrial giants in providing ERP systems solutions. In GSCM,
information integration can be achieved by linking up the ERP systems of individual supply chain
members. Strategic partnerships such as vendor-managed inventory (VMI) and collaborative
planning, forecasting and replenishment (CPFR) can also be achieved in the presence of the ERP
systems.

3. Cloud computing: Information systems and software applications tools, including storage services,
are commonly available on the cloud. In many cases, they are called “services”. For example, we
have cloud platform as a service (PaaS), and cloud infrastructure as a service (IaaS). GSCM
definitely is facilitated by cloud computing because supply chain members, located in
geographically different places, can all subscribe to the same cloud services and use the same (or
compatible) systems solution. It is well-known that many ERP systems, logistics management
systems (LMS), and EDI platforms have moved to the cloud. Undoubtedly, a massive amount of
data is available from the cloud which can improve GSC operations.

4. Internet of Things (IoTs): In a GSC, there are lots of business processes and product. IoTs can help
to establish the virtual linkage among them so that the critical parts are all connected by devices.
As a consequence, a massive amount of data will be available which yields a high degree of supply
chain visibility. This not only improves supply chain operations, but also allows members of the
GSC to more clearly define their own duties so that the supply chain is under good control. As a
remark, recent terminologies related to big data analytics such as Industry 4.0 and Internet Plus (a
term used in China) are all related to IoTs.

5. Social media: It is known that consumers in the market are very powerful in the big data era. They
can group together via the social media (such as Facebook and Twitter) to voice out their
complaints and even boycott brands or products they dislike. On the other hand, if a supply chain
provides the needed information to help consumers to recognize the merits of the companies or

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 products (e.g., the level of sustainability, the high ethical standard, etc), consumers will also share
the good news on the social media. Thus, GSC members can make use of the big data collected
from social media to improve their operations (Choi 2017).

From the above technological applications, members of the global supply chain will have acquired
a lot of huge datasets which would require proper analytical methods to “digest” them and gain insights
to support managerial decision making. This calls for “big data analytics” which is a hot industrial
term (Choi et al. 2017). Big data analytics can be implemented by different strategies using different
models. For example, there are methods which aim to decompose the big datasets into smaller datasets
and process them in parallel (called “divide and conquer” strategy). Alternatively, there are also
methods which conduct data filtering and sampling from the big data which avoids the need of making
use of all data points (because some data points are redundant or very difficult to use). To implement
these strategies for big data analytics, the commonly used techniques (which are not mutually exclusive)
include clustering, data mining, statistics, fuzzy logic, optimization, evolutionary computation,
Bayesian networks, machine learning, etc. As this paper does not aim to focus on examining the details
of these techniques, interested readers can check for more from the excellent reviews by Chen and
Zhang (2014), and Wang and He (2016).

With the proper big data analytics methods, we can effectively process the massive amount of data
collected from ICT, ERP systems, cloud services, IoTs and social media to improve GSC visibility
and support decision making in operations management.

USING TECHNOLOGIES AND THE SOS APPROACH TO IMPROVE GSCM

In this section, we explore how big data technologies and the SoS approach can be combined to
enhance GSCM. To make the points more specific, we present an example on risk management in
GSCs.
For risk management (Narasimhan and Talluri 2009; Choi and Lambert 2017), we focus on the
processes such as risk monitoring, risk identification, risk assessment, risk analysis and methods to
deal with risk (Goroh et al. 2008). We construct Figure 1 which shows how different big data related
technologies can play a role in implementing the SoS approach to achieve proper risk management in
the GSC. Notice that each cell in Figure 1 shows the proposed action to take with respect to the specific
technology item and principle under the SoS approach. This is hence a very specific action matrix to
assist managers in employing the big data related technologies to improve decision making in the GSC
SoS.

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 Figure 1. Action matrix for risk management in GSCs using big data and the SoS approach
SOS BIG DATA RELATED TECHNOLOGIES
APPROACH ICT ERP Systems Cloud IoTs Social Media
Computing
Objective Enhancing visibility Improving the Supporting By improving supply Social media allows
to help supply chain implementation of information sharing chain visibility, IoTs the GSC members
members align their sense and respond and improving speedy based applications learn about
objectives to address systems to achieve the data driven support risk consumers in the
risk issue in the GSC risk management collaboration to attain monitoring to help market and set the
SoS objective in the GSC the objective of GSC attain the risk right risk sharing and
(as close as possible) management goal management goals
Control Providing the needed Every supply chain Providing the needed Connecting the GSC members can
information so that member is an efficient technological support decentralized get more market
the decentralized organization by for decentralized operations together signals from social
members are willing having an ERP control in conducting with enhanced media which help
to share the risk of system. Risk risk assessment and visibility can help dampen problems
the GSC management for the analysis improve risk such as the degree of
whole GSC can be monitoring, risk bullwhip effect. This
supported by the identification and reduces risk even
integration of reduce operational under a decentralized
individual ERP risk GSC
systems
Structure ICT is a must for To improve risk Cloud computing Developing IoTs for Digital consumers in
proper risk management, ERP provides a service all supply chain the social media era
management in systems should be platform for members helps to are powerful. It is
GSCs. Supply chain implemented by all decentralized GSC achieve better risk crucial to build a
members should members. Develop members which can control and good reputation for
develop the needed members so that enhance the monitoring in the all members via
ICT every one is ERP responsiveness of the GSC social media
systems ready SoS for robust risk
management
Uncertainty ICT supports proper For each supply chain Cloud computing can IoTs help to achieve Market information
risk management member, ERP systems help reduce higher supply chain acquired through
measures (such as help consolidate data uncertainty if proper visibility and this social media
risk assessment, sense and make optimal data mining tools are improves the supply improves demand
and respond) to deal decisions within the present to give chain’s resilience forecast, reduces
with uncertainty company. Integrating accurate prediction towards uncertainty demand uncertainty
members’ ERP and risk
systems together
facilitates the global
view of uncertainties
faced by the GSC
which helps to design
proper risk
management
measures, e.g., risk
hedging among
markets
Interfaces ICT is on the Reducing risk by Cloud computing IoTs cannot function Social media is the
interface between paying attention to the makes the interface well if the interfaces interface between
supply chain interfaces between problem easier to deal are not well- digital consumers and
members. Developing ERP systems of with if all or most developed. This is the GSC. To be
a good ICT platform different supply chain members are using critical to proper risk market sensitive,
is essential for GSC members the same cloud management of the members should pay
risk management services. This GSC attention to the
enhances risk comments and
management activities created by
social media

Observe that the action matrix we proposed in Figure 1 is scalable. Managers can expand or shrink
it with respect to their own practices and technology adoption. For example, they may add new
technologies to the matrices by adding a column. They may also remove an SoS principle by removing
a row if they find that it is unimportant to their own GSCs.

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CONCLUSION & FUTURE RESEARCH
In this paper, we have explored how the SoS approach can be applied to improve GSCM with the use
of big data related technologies. We have revealed that the GSC is a well-qualified SoS by using the
Maier’s criteria. We have explored the SoS approach and identified various important principles which
help to improve GSCM. We have also examined various critical big data related and commonly seen
technologies and explained how they may be used for GSCM. We have demonstrated how big data
related technologies can be incorporated into the SoS approach to enhance GSCM with a specific
example on GSC risk management. An action matrix, which is flexible and scalable with respect to
the real world situation, has also been developed. It provides managers and practitioners quick
guidance on how big data related technologies can be used for GSCM using an SoS approach.

In addition to providing guidance to managers, this paper also paves a new way for future research
on the use of SoS and big data for GSCM. For example, one can develop new action matrices for other
important areas such as green GSCM (Sarkis 2003; Wilting and van Oorschot 2017), project
management (Bierwolf 2016; Bierwolf 2017) in GSCs, etc. One can also implement the proposed
actions and study the corresponding performance in the real world. Tannahill and Jamshidi (2014),
Haimes et al. (2015) and Tsilipanos et al. (2015) are good references for the technical analysis in this
future research extension.

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BIO:
Tsan-Ming Choi received his Ph.D. from Department of Systems Engineering and Engineering Management,
The Chinese University of Hong Kong in 2002. He is currently a full professor at The Hong Kong Polytechnic
University. His research interests mainly focus on supply chain systems optimization and management. He has
authored/edited 16 books and published over 150 papers in ISI Web of Science Indexed journals such as
Automatica, Decision Sciences, European Journal of Operational Research, IEEE Transactions on Automatic
Control, IEEE Transactions on Automation Science and Engineering, IEEE Transactions on Cybernetics, IEEE

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Transactions on Engineering Management, IEEE Transactions on Industrial Informatics, IEEE Transactions
on Systems, Man, and Cybernetics - Systems, INFORMS Service Science, Naval Research Logistics, Production
and Operations Management, Supply Chain Management, etc. He is currently a senior editor of Production and
Operations Management, and Decision Support Systems, an associate editor of IEEE Transactions on Systems,
Man, and Cybernetics – Systems, Information Sciences, and Transportation Research – Part E, and an editorial
board member of INFORMS Service Science, and International Journal of Production Research. Professor Choi
received The President's Award for Excellent Achievements of The Hong Kong Polytechnic University in 2008,
and the Best Associate Editor Award of IEEE Systems, Man, and Cybernetics Society in 2013 and 2014.

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