Any business process comprises various activities and services, co-ordination among which helps achieve the goal of profitability and growth. Activities and processes have dependencies.
For example, there is a large number of dependencies in managing supply chain. Every activity in the supply chain is dependent on several factors. Demand variations depend on consumer behaviour. Consumer behaviour depends on seasonal changes, age, region, prices and numerous other factors. Sourcing of raw materials depends on place and availability. Lead time depends on distance, mode of transport, vessel or vehicle availability, load-carrying capacity, infrastructure and numerous other factors.
These dependencies often act as constraints which limit efficiency and could even lead to disruptions or failures in the supply chain management process.
Identifying dependencies is a stepping stone towards streamlining supply chain or other similar processes and mitigating associated risks. Several mathematical techniques are useful in identifying dependencies, their criticality in the supply chain, potential risks and business implications. These techniques help chart out the complete set and sequence of activities and tasks involved in the supply chain, identify all sets of dependencies in the critical path, establish correlation between these dependencies, assign a risk index to each of these dependencies based on the magnitude of their disruptive impact thereby highlighting gaps and areas which need attention and resolution by order of priority.
There are various types of dependencies. For instance, there are dependencies internal to an organization or a system. For an organization, these could be the various functions and processes under its internal control. Similarly, there are external dependencies like international laws, policies, regulations and partner organizations which could be out of the scope of an individual organization’s control. By their position in the process and the manner in which they act, dependencies could also be serial or circular. Serial dependencies are rectilinear or radial hence mutually exclusive, while circular dependencies are mutually recursive.
Producing goods needs manufacturing activity to be scheduled. Scheduling a manufacturing activity needs raw materials to be available. Procurement of raw materials needs sourcing contracts to be finalized. Finalization of sourcing contracts need a comprehensive vendor evaluation process to be completed. These are examples of serial and mutually exclusive dependencies.
Business depends on investments. Investments in business are driven by prospects of profitability. Profits in business, in turn, depend on investment. Similarly, economic growth depends on capital, infrastructure, policies, resources and investments, while investments depend on economic growth among other factors. Countries depend on each other for trade. Suppliers depend on customers for business just as the latter depend on the former for products and services. User actions depend on data-driven decisions which, in turn, depend on accuracy of data entered by users. These are examples of circular and mutually recursive dependencies.
Understanding the type and nature of dependencies is important to establish correlations between them and determine the impact of potential risks due to them. The correlations serve as the basis of designing processes and the risks serve as the basis of contingency planning. Both process design and contingency plan serve as the basis of formulating and successfully operationalizing a robust strategy. Dependencies thus constitute an important part of strategy formulation and execution.
Simulation modelling is one such effective technique to identify dependencies. Process experts guide organizations in successful implementation of simulation modelling. With their expertise in detailing a variety of processes across industry sectors and with the required inputs they gather from functional experts within the organization, these external process experts lay out schematic diagrams of the various activities in the entire process landscape of the organization they are consulted by. These diagrams encompass the activities and entities, both internal and external to that organization, thereby highlighting dependencies and associated risks. These diagrams are the building blocks of their business model. Not only do they educate organizations highlighting dependencies in their processes, but also empower them with the agility volatile business environments demand in responding to changes and managing the dependencies. They set the direction of collaboration by establishing correlations in interdependencies and identifying touchpoints of co-ordination. In effect, they help turning dependencies into cadencies.