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INTRODUCTION TO SYSTEMS
THINKING

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Introduc8on to the systems concept

Ø The six blind men and an

elephant
Ø A par2al truth
Ø The moral of the story:
having a ‘holis8c’ view
Ø “The behaviour of a
system cannot be known
just by knowing the
elements of the
system” (Meadows 2008, p.7)

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Defini8ons of Systems

Ø “A system is a set of elements or parts that is

coherently organised and interconnected in a paIern
or structure that produces a characteris2c set of a
behaviours, oJen classified as its ‘func8on’ or
‘purpose’” (Meadows 2008, p.188)

Ø “Simply defined, a system is a complex whole the

func2oning of which depends on its parts and the
interac2ons between those parts” (Jackson 2003, p.3)

Ø “A system is more than the sum of its parts – it is the

product of their interac8ons” (Ackoff 1999)

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A System versus a Collec8on

Ø A collec8on or a heap is
also composed of a
number of parts but
they are just dumped
together and are not
interconnected I hope we are
a system!
(Sherwood 2002)
Ø A marriage: a collec2on
or a system? Honey, are we a
collection
or a system?

Source: http://www.yaseenkhan.org

Basic Proper8es of a System

Ø A system must consist of :

ü Elements or parts
ü Interconnectedness & Interac2ons
ü Func2on or purpose
Ø Examples: a business, football team;
diges2ve system; school; faculty, city;
corpora2on; animal; tree; etc.

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Defini8ons of Systems Thinking

Ø “Systems thinking is a way of looking at, learning

about, and understanding complex
situa8ons” (Wilson 2004, p.7)
Ø “Systems thinking is a way of seeing and talking
about reality that helps us beIer understand and
work with systems to influence the quality of our
lives” (Kim 1999, p.2)
Ø Systems thinking is a ‘new way of thinking’ to
understand and manage complex problems (Bosch
et al. 2007; Cabrera et al. 2008)

Accoun2ng Complexity

Product Complexity Customer Complexity

• Small batch sizes • Customized products
• Long set-up 2mes • Short lead 2mes
• Unique components • Unpredictable orders
• Special tests/inspec2ons • Extensive technical support
• Extensive material handling • Extensive post-sales support
• Special vendors • Special tests or requirements

Source: “Introduc2on to Ac2vity-Based Cos2ng,” Robert S. Kaplan, Harvard Business

MIT Center for Transporta2on & Logis2cs School Publishing, July 5, 2001. (Product Number: 197076) 14

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What is complexity?

“I know it when I see it”

Justice Potter Stewart, in Jacobellis v. Ohio
regarding possible obscenity in a movie.

US Supreme Court Justice Potter Stewart

1915 - 1985

MIT Center for Transporta2on & Logis2BcysRobert S. Oakes [Public domain], via Wikimedia Commons 15

What is complexity?
• Complicated versus Complex
• Two types of complexity (Singe 1990)
• Detail Complexity:
Dis2nct number of processes or parts within the system
• Dynamic Complexity:
Unpredictability of response of the system due to interac2ons

A system is complex if it “is made up of a large

number of parts that interact in a non-simple way.”

Herbert Simon 1962

Source: Bozarth et al, “Impact of Supply Chain Complexity on manufacturing Plant

MIT Center for Transporta2on & Logis2cs Performance,” JOM 2009. 16

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Complexity Drivers

MIT Center for Transporta2on & Logis2cs 17

What are the drivers of SC Complexity?

less complex

1. Numerousness
2. Variety/Diversity
3. Interconnec2ons/Interac2ons
4. Opacity of Interac2ons
5. Dynamic Effects

more complex

Source: Mitchell, “Complexity – A Guided Tour” Oxford Press 2009.

MIT Center for Transporta2on & Logis2cs 18

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Why do we care?
• Complexity is not introduced for complexity’s sake
• Drivers of complexity = Drivers of profitability
• Drivers of profitability
• Increase revenue per unit
• Increase the number of customers
• Increase number of units sold
• Decrease cost per unit

• Implicit to every strategy or ac2on intended to

improve profitability is a hidden cost of complexity!

MIT Center for Transporta2on & Logis2cs 15

Profitability Drivers = Complexity Drivers

Revenue/Unit
Numerousness
# Customers
strategy Variety/Diversity
or action
# Units
Interactions
Cost/Unit

MIT Center for Transporta2on & Logis2cs 16

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Where does complexity enter the supply chain?

Most complexity enters from the ends!

customers and market

research & source make deliver marketing

development & sales

Desire for unique Desire for a wide

solu8ons and diverse product
poruolio.

Adapted from Scheiter et al, “How much does complexity really cost?” A.T. Kearney 2007.
MIT Center for Transporta2on & Logis2cs 17

Iden2fying where complexity lies

Map the complexity “fingerprint”
• Iden2fy the poten2al complexity drivers
• Count total number used
• Count number that account for 80% EBIT
Technologies

Customers
Brands
Package
Types

SKUs

Complexity Drivers è

Total Number 10 33 892 65 2,200

Number in 80% EBIT 2 17 197 41 214

Percentage 20% 52% 22% 63% 10%

Adapted from Scheiter et al, “How much does complexity really cost?” A.T. Kearney 2007.
MIT Center for Transporta2on & Logis2cs 18