PART 18. SUPPLY CHAIN LOGISTICS – DYNAMIC DECISIONS

This series presents A LEADERSHIP STRATEGY, as the subtitle indicates. They use Supply Chain and Logistics as the focal point for discussing contextual leadership in the face complexity, randomness, risk, flexibility, agility and non-rational decision making. In them I discuss the multi-dimensional approach to leadership: what is leadership? How do we lead? What is our capacity to lead? And specifically, they look at leadership from the perspectives of risk, ambiguity, uncertainty, beyond command and control process management.

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In the Art of Resilience [blog #4], we identified two critical practices worthy of consideration when handling risk and risk events in complex systems like Global SCL:

1.      Don’t need all the answers. When we try hard to find the answers in the face of traumatic events, that trying too hard can block answers from arising. There is strength in knowing that it's okay not to have it all figured out right now and trusting that we will gradually know when we are ready.

2.     Menu of capabilities. We need to have lists of possible actions, plans and processes that support our strategies and alternative directions when we need them most.

Both practices speak to a dynamic approach to decision making: answers arising naturally as a form of discovery, and our capability to discern possibilities and potential solutions are core to being resilient.

Impediments to resilience are built into how we conduct business internationally and how we organize Global SCL in terms of command-and-control and process management. As noted in blog #8,

·        Global SCL is too comfortable with deterministic models and tools, such as forecasting models, sales and operations planning, and other processes that never take uncertainty into account.

·        Global SCL processes are driven by cost management and delivery improvements, which are not comprehensive enough to handle complexity, and cannot effectively deal with risk and risk events.

The brutal fact is that Global SCL growth results in uncertainty, complexity and risk growing in frequency and severity. There is a need to utilize probabilistic tools to account for these factors. Before we can identify which probabilistic tools to use, we need to understand more fully the similarities and differences among different ways we make decisions. In organizations, various types of decisions apply:

From this taxonomy, we can build a culture around dynamic decision making. We start with the question: What is Dynamic Decision Making?

Dynamic decision-making is interdependent decision-making that takes place in an environment, aka a complex system, which changes over time either due to previous decisions which have an impact on that environment or due to events that are outside of the control of the decision maker. Dynamic decisions, unlike conventional one-time decisions, are more complex and occur in real-time. They involve the extent to which people intuitively use their experience to handle complex systems.

Dynamic decisions are complex in themselves. They

·        Involve a series of decisions to reach a goal, not a single decision;

·        Include the interdependence on previous decisions, which are not isolated from previous decisions;

·        Work in changing environments, not in static fixed environments that do not change;

·        Entail real time pressures [such as risk events], not situations with no time pressures.

Dynamic decision environments have the following characteristics:

·        Dynamics: refers to the dependence of the system's immediate state on its previous state, driven by positive feedback or negative feedback, respective examples of which are the accrual of interest in a savings bank account [gain] or the elimination of hunger by eating [no longer hungry].

·        Complexity: refers to the number of interconnected elements in a system that make it difficult to predict the behavior of the system as a whole and also of its individual parts in terms of the number of components in the system, the number of relationships between them, and the nature of those relationships. Complexity is also a function of the decision maker's ability to handle complexity.

·        Opaqueness: refers to the physical invisibility of some aspects of a dynamic system [not everything is or can be controlled] and also depends on a decision maker's ability to acquire knowledge of the components of the system [not everything is or can be known].

·        Dynamic complexity: refers to the decision maker's ability or inability to control the system using the feedback the decision maker receives from the system, caused by the complexity of the system itself and can include:

o  Opaqueness causing unintended side-effects.

o  Dynamic, non-linear relationships between components.

o  Feedback delays between actions taken and their outcomes.

Dynamic decision making does not focus on what you decide; nor does it frame a process on how you reach a decision. It is not a deterministic model and does not include a step by step checklist.

Dynamic decision making is probabilistic. It focuses on and identifies probable solutions that are themselves not complete and final. Probable solutions may lead to possible actions, which themselves are situational and contextual – applicable for the moment so long as they contribute value.

Dynamic decision making is situational and aligned to an agile mindset. As a tool in probabilistic modeling, it focuses on risk-informed decisions and the value of managerial flexibility. In effect, dynamic decision making is a way to gain insight into potential uncertainties, their probability, their impact and interdependencies, weighing the value of options that introduce greater flexibility into the organization. 

Dynamic decision making supports the ability of strategic leaders to lead in context.  

SPONSOR: The Logistics Institute is a Canadian-based professional organization delivering programs that enable practitioners to become certified professionals by earning P.Log, LS, and SC designations. Institute programs are competency based; they validate capability, not just knowledge. By earning these designations one is recognized as a professional and a strategic leader in Global Supply Chain Logistics. For further information go to www.loginstitute.ca