You may well wonder what could be the possible connection between the world of natural Physics and the world of Supply Chain Management. Well, there is a fascinating new field of study called Social Physics that is actively examining the application of the laws of natural Physics to the affairs of human beings. Philip Ball’s recent book “Critical Mass - How One Thing Leads to Another” gives a fascinating insight into the subject matter and discusses the science in some detail (Philip Ball, Arrow Books, ISBN 9780099457862).

As Ball explains, one of the most curious of the phenomena that occur in natural Physics is what is known as a Phase Transition. This happens when, for example, water freezes to ice or boils to vapour. These phase transitions for water happen at what are called critical points in temperature. For water, as we all know, the critical points are 0 degrees centigrade for the solid to liquid transition and 100 degrees centigrade for the liquid to gas transition.

“So what?” you may be saying to yourself. “I am a Supply Chain Manager or a Logistics Manager, or a Company Director or whatever, what relevance do phase transitions in natural Physics have for me”. Well the answer is - quite a lot in fact - read on and I will explain.

You see, the really curious thing about water freezing is that close to the critical point of 0 degrees centigrade, a very small change in temperature can cause the whole system to shift very quickly and completely from one state or phase to another. In effect it is either entirely liquid or entirely solid ice - there is nothing in between and the change from one to another happens all at once in response to an imperceptibly small change in temperature.

Similarly today, under the strain of recession many businesses and indeed entire supply chains are moving into regions where the organisational “temperature” is getting perilously close to its own particular critical point. And what would natural physics tell us about the conditions close a critical point? It would tell us that very small changes in this organisational temperature could cause a dramatic and sudden phase transition.  

The concerning thing is that this would be a phase transition between survival and prosperity on the one hand and failure and ruin on the other. Close to the critical point small changes in the organisational temperature in the wrong direction will now have big effects shifting an organisation from liquid and flowing to frozen rock solid in the blinking of an eye.

Understandable as it may be given the current economic environment, the tendency to batten down the hatches, suspend all change and action, cut investment across the board and become introspective and defensive could be fatal at this time. This approach, in my opinion, will lead to a small but significant cooling in organisational temperature that, close to the critical threshold as we are, could cause things to freeze up catastrophically. 

On the other hand, if the current challenges are viewed as a call to action to create a sense of urgency, if they can be a catalyst to get things done now to make operations more efficient and productive, more effective in delivering value to the customer and more focused on bolstering cash flow, this will maintain the organizational temperature above the critical point. This energy will keep things flowing, guarantee liquidity and prepare the business well to emerge stronger than ever from the tough times ahead.

Those businesses and those supply chains that do successfully stay above the critical point and learn to thrive in the face of challenge will emerge leaner, fitter and stronger than at any time in the past. To be among them, the time to act is now, it is a time to be bold, a time to look for opportunities, a time for conviction, for leadership and for action.

Here are some of the things that you can do to keep your organisational temperature above the critical point:

• Use the recession as an accelerant for action and pull forward planned restructuring
• Seek out multiple opportunities for productivity improvement
• Drive innovation harder and faster
• Streamline processes, removing non value added activities and excess inventories
• Improve focus on measurement systems and key performance indices
• Focus Cap-Ex investments on initiatives with short-term paybacks in the 12-month range
• Maximize flexibility and protect cashflow
• Don’t lose site of longer-term investment plans for future growth

And remember, you cannot cut your way back to success, you are going to have to innovate and be creative to thrive and prosper in the face of challenge.