Supply chain management: Motorola’s complexity index

Now, I'd like to give you an example. It is an example by Motorola and their complexity index, which illustrates some of the key points I've been making quite well. At Motorola, competitive pressure caused the company to extend it's range of mobile telephones. However, often there was little commonality of parts across the range. For a single product there could be over 100 possible configurations, i.e., four different colors, 30 software choices. Furthermore, these product variations were made ahead of demand, to a forecast that was only accurate 3% at the time. To address this problem, Motorola devised the "complexity index" for each product, which included the number of components, the degree of commonality, lead time of supply, and so on. New product ideas with high scores on the complexity index, tend not to be preceded with. As a result of this focus on complexity reduction, Motorola was able to significantly reduce it's cost, and improve it's responsiveness. Now I think that's a great example of a company, focusing on reducing complexity in the supply chains. And this is in terms of recognizing well, our customers demand increased variety, they demand increased responsiveness from the companies, but one of the things that companies need to do is reduce complexity. And again, I'd like to reintroduce the point of configuring our bill of materials, with the aim to make them coherent with the supply chain. And Motorola has devised a great index here, to not move on forward with those products that have too much complexity in their manufacturing.