Have you ever considered the impact of entropy on your business — let alone your supply chain? If you haven’t, you’re not alone. It was only during my undergraduate studies, while talking with a physics professor about my career, that I began to consider it.

Telltale Signs That Add Up

Entropy is a way to describe how much disorder or randomness there is in energy or a system, but what does that really mean? Consider the First Law of Thermodynamics:

Energy can’t be created or destroyed. It can only change forms.

Now consider the Second Law of Thermodynamics in simple terms: entropy always increases. This principle explains, for example, why you can’t unscramble an egg.

Here’s another example of entropy: As you cruise through the countryside, you spot an old barn that’s seen better days—some boards are missing, the paint is peeling, and the surrounding field is overrun with brambles and weeds. The barn and the field are transitioning into a more chaotic, lower energy state, resulting in greater disorder.

Businesses often experience entropy without even noticing it—minor declines that accumulate into a much bigger issue, greatly impacting sustainability and profits. Common instances that often arise in the workplace include:

• Meetings start late.
• Offices are messy and desks untidy.
• KPIs are not updated on time or at all.
• An operator stopped doing their first-piece inspection.
• A buyer stopped following up on purchase order acknowledgments.

What about in supply chain management (SCM)? Entropy creeps into the supply chain in some telltale ways. I notice this in many areas of SCM. However, it doesn’t occur instantly. It may take weeks, months, or even years to build up, which I refer to as entropy creep.

• Unorganized and messy warehouse.
• Data inaccuracies such as inventory accuracy or lead times.
• Firefighting, rushed orders, late shipments.
• Unhappy customers.
• Stressed employees.
• Increased costs.

Bust Supply Chain Entropy in 3 Stages

When people don’t follow processes or processes don’t exist, entropy creep occurs. When processes work well, we can get complacent and move on to the next problem without following up to be sure sustainability is in place. But it’s not enough to follow the motto of working harder.

Organizations must understand the First and Second Laws of Thermodynamics, work smarter, utilize internal talent to build processes that prevent entropy creep, and most importantly, understand and accept the importance of crawling before walking, and walking before running.

Follow these three phases to achieve those goals — the keystones of a process methodology I call Entropy Busters®:

Phase I: Overcoming Denial

In this phase, you increase team involvement to focus problem identification and resolution. You’re identifying and dismantling patterns of denial. You’re loading the team bus with the right people, and engaging them.

Phase II: Making Progress

To achieve operational excellence, you need to conduct visual daily management, know your numbers and your priorities, and get everyone on the same page.

Phase III: Tending to Your People

People matter. Working on team building, establishing community and a sense of belonging, and having fun will build the kind of teamwork and accountability that prevent teams from turning into firefighters and keep entropy at bay.

Entropy is a Significant Threat to Profitability

Here’s the bottom line for any business — and especially your supply chain. Entropy is a gigantic profit killer. Ask yourself these questions to see if entropy has already crept in:

1. Is your team good at the early detection of problems, or are they better at firefighting?
2. How often are there surprise part shortages, inventory corrections, supplier issues, schedule changes, or pricing issues?
3. How good is the supply chain team at managing the supply chain process?

Energy and resources must be added to build and maintain an organization, building and sustaining a world-class supply chain process. If you need work done to your enterprise, more heat, energy, or resources must be added from the outside or transferred internally from non-value-added activities.

© Art Koch

Originally published in YFS Magazine