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Procedia CIRP 17 ( 2014 ) 224 – 229

Variety Management in Manufacturing. Proceedings of the 47th CIRP Conference on Manufacturing Systems Evaluation of Complexity Management Systems – Systematical and Maturity-Based Approach

Andreas Klutha*, Jens Jägera, Anja Schatza, Thomas Bauernhansla,b

a Fraunhofer Institute for Manufacturing Engineering and Automation - IPA, Nobelstraße 12, 70569 Stuttgart, Germany bInstitute of Industrial Manufacturing and Management – IFF, University of Stuttgart Nobelstraße 12, 70569 Stuttgart, Germany

* Corresponding author. Tel.: +49-711-970-1942; fax: +49-711-970-1927. E-mail address: [email protected].

Abstract

The way to deal with the strongly increasing complexity of the company itself and its environment has become a key competitive factor. The complexity within a production company is characterized by the challenges encountered in daily business processes and can be described by the four dimensions of complexity: variety, heterogeneity, dynamics and non- transparency, as well as their interrelationships. Despite this increasing importance, only few companies have access to adequate tools for complexity management. Most companies have not introduced or implemented yet a complexity management system/approach or they do not know, if the used complexity management methods are efficient and adequate. Therefore, the question rises: How can a company be reviewed and evaluated regarding its complexity management skills? Maturity models can be used to support the analysis and assessment of skills and development-levels of products, processes or organizations by defining different levels of maturity, in order to assess the extent to which an object fulfills defined qualitative requirements. The various levels of maturity within such models can be used to describe the different achievable skill levels. Maturity models not only include methods for the assessment of skill levels, but also provide incentives and measures to increase the degree of maturity. After the introduction of measures to increase the skill level of maturity these models are also suitable to measure and evaluate the progress made. This paper presents an approach for an evaluation model of complexity management systems. First, the basics of the so-called advanced Complexity Management are given, highlighting the difference between complexity and complicacy as well as the comparing external and internal complexity. The fields and dimensions of complexity are presented as well. After that, maturity models fundamentals are presented by showing state-of-the-art maturity model approaches. Furthermore, the overall maturity-based approach for evaluation of complexity management systems, especially the maturity of their functionalities and capabilities regarding the needs and purposes of manufacturing enterprises, is presented by adapting and combining existing methods and models. The maturity-based approach describes different levels of complexity management systems within a production company, also taking into account recommendations and measures to increase the degree of maturity. © 2014 Elsevier B.V. This is an open access article under the CC BY-NC-ND license © 2014 The Authors. Published by Elsevier B.V. (Selectionhttp://creativecommons.org/licenses/by-nc-nd/3.0/ and peer-review under responsibility of the International). Scientific Committee of “The 47th CIRP Conference on Manufacturing SelectionSystems” inand the peer-review person of the under Conference responsibility Chair Professor of the HodaInternational ElMaraghy. Scientifi c Committee of “The 47th CIRP Conference on Manufacturing Systems” in the person of the Conference Chair Professor Hoda ElMaraghy” Keywords: Complexity management, Evaluation, Maturity Model

1. Introduction and problem statement revolution show that - in the near future - an enormous flexibility and adaptability of companies will be required [1]. The trend of increasing digitalization and current The corresponding significant increase of complexity is developments towards the so-called fourth industrial already perceived by industrial companies worldwide. The way of dealing with the strongly increasing complexity of

2212-8271 © 2014 Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/). Selection and peer-review under responsibility of the International Scientific Committee of “The 47th CIRP Conference on Manufacturing Systems” in the person of the Conference Chair Professor Hoda ElMaraghy” doi: 10.1016/j.procir.2014.01.083 Andreas Kluth et al. / Procedia CIRP 17 ( 2014 ) 224 – 229 225

both the company itself and its environment has become a key Availableness of methods and tools to systematically assess and evaluate complexity competitive factor [2]. Percentage distribution

In order to face complex problems or complex situations in 16% complete methods 4% general, humans have usually various options. The simplest existing way is to use so-called “trial and error”, which means try one largely suitable methods 12% 28% Partially solution and if this does not solve the problem, try the next partial suitable mehtods 28% existing solution. Another simple option is to fade out the complex marginal suitable… 37% Not existing problem. Both options are no learning strategies and do not no existing methods 19% 56% lead to suitable solutions. More successful strategies for 0% 10% 20% 30% 40% identifying and quantifying complexity are “intuitive review” (reduction of complexity by pattern creation on the basis of acquired knowledge and using diversity of knowledge from Fig. 1: Availability of methods and tools to systematically assess and evaluate heterogeneous groups), “rational understanding” complexity [5] (understanding in detail by prioritizing the level of detail in Only 16% of the consulted companies state, that they have terms of 80/20 rule), as well as “focussing on individual suitable methods or tools to systematically assess and evaluate factors” (trivialization by dividing the main complex problem complexity (see Fig. 1). into single minor problems). Therefore, also industrial Most companies have not introduced or implemented a companies have to consider different complexity issues and complexity management system/approach yet or they do not strategies. know, if the used complexity management methods are Today´s companies can face the progressively increasing efficient and adequate. Therefore, the question rises, how can external complexity in global markets with an appropriate a company be reviewed and evaluated regarding its "healthy" internal complexity [3]. The complexity within the complexity management skills? company is embossed by difficulties encountered in daily business processes (e.g. number of products, variety of 2. Advanced Complexity Management production processes, short-term customer change requests, unclear workflow, etc.) and can be described by the four What is the right level of complexity in order to be dimensions of complexity: variety, heterogeneity, dynamics successful on the market and react optimally to external and non-transparency, as well as their interrelationships. complexity? In order to answer this essential question, Internal complexity can occur in different ways. If sales strategies of advanced Complexity Management can be targets cannot be achieved due to "exotic" customer applied. In this overall context, advanced Complexity requirements, new product variants will be developed and Management is the target-oriented and value-added utilization produced, leading to an increasing product-complexity. Based of available resources in order to hamronize internal and on that, the interconnected process- and also organization- external complexity, using appropriate manipulating, coping complexity will also increase. This interrelationship will lead or pricing strategies. to a higher cost-level [4]. Current complexity management approaches are mostly 2.1. Complicacy vs. complexity focused on the complexity of products and especially on product modularization and variant management. The When dealing with complex problems and situations, and meaning of ideal complexity, of product profitability in terms before developing specific strategies, it is important to of product complexity related to complexity in process and distinguish between several terms, which are often used in the organization is mostly ignored. same content, although they have different meanings and Based on an empirical study “advanced Complexity definitions. In this case the terms complicacy and complexity Management – the new management discipline” performed in are often used in the same way [6]. Nevertheless each term 2013 by the Fraunhofer Institute for Manufacturing and definition has specific characteristics and different Engineering and Automation IPA in Stuttgart, 82% of the meanings (see Table 1). respondents (n=158) appraise, that the overall topic of complexity will gain in importance [5] . Table 1: Comparison complicacy vs. complexity Despite this increasing importance, only few companies have access to adequate tools for complexity management [2]. Complicacy Complexity - Causal interrelationships - Surprising interrelationships - Calculable and predictable - Not calculable and not - Controllable predictable - Objectively describable - Not controllable, just observable and influenceable - Characterized by just the two dimensions variety and - Subjectively perceptible heterogeneity - Characterized by all dimensions, including dynamics and non- transparency 226 Andreas Kluth et al. / Procedia CIRP 17 ( 2014 ) 224 – 229

As presented in Table 1 complicated issues can be 2.3. Fields and dimensions of advanced Complexity described and controlled by causal interrelationships between Management the corresponding objects. Contrary to that, complex issues and problems cannot be predicted or controlled in that A first step to identify internal complexity and to improve context, because such problems also include non-causal, but its transparency is the systematic subdivision into complexity surprising interrelationships. Therefore complex issues just fields. These are those divisions in which complexity arises can be influenced or manipulated in certain ways. [10], such as order-processing, production network, product- The main difference between complicacy and complexity portfolio or the IT system landscape (see Fig. 2). is the characterization by so called dimensions of complexity The complexity fields are used to analyze and structure the (see chapter 2.3). Complicated issues are described just by the existing internal complexity of a company. Internal two dimensions variety and heterogeneity [7], whereas complexity can be described by the three main complexity complex issues include also the dimensions dynamics and fields product (including services), processes and non-transparency [8]. That means, as soon as dynamic aspects organization. These main fields can be further subdivided into or factors concerning non-transparency are involved, the more specified fields as shown in Fig. 2. problem/issue is related to complexity. Each complexity field has its own complexity, but in order Although there is no academic consensus about a to describe the overall internal complexity of the company, consistent definition, within this paper it can be summarized, the existing interrelationships and interdependencies between that complexity can be seen as the combination of a various, the single complexity fields have to be considered as well. heterogenic system elements and their interrelationships that Complexity can in principle refer to elements of a system or are changing dynamically and not clearly comprehensibly. their interrelationships. As mentioned before, internal complexity (company 2.2. External vs. internal complexity perspective) can be described in general by the four dimensions of complexity: variety, heterogeneity, dynamics The complexity of the external system environment can and non-transparency. only be met with an equally strong internal system complexity Variety describes the number of distinguishable states and [3]. External complexity describes the market perspective, configurations / distinguishable elements and relations of a which is characterized by so-called changeability and system. Heterogeneity describes the diversity of the system`s flexibility drivers (e.g. population growth and demographic elements and the divergence of their interrelations. The change, increasing consumption of resources or digitalization). complexity dimension dynamics describes the changeability Internal complexity describes the company`s perspective, over time as well as possible turbulence effects of the system. which is characterized by the complexity fields and the Non-transparency is characterized by the knowledge about the occurrence of complexity dimensions. system and its interdependencies in terms of lack of Internal complexity is influenceable directly and cannot be definitions or fuzziness. The less a company knows about the considered isolated, because - as stated before - it inevitably overall system, the higher is the non-transparency. has to be adapted to the external complexity demanded by the In general it can be stated that higher degrees of each market [3]. Internal complexity is exactly ideal when it single dimension lead to an increasing complexity of the counters the external complexity equivalently [9]. overall system. If internal complexity is too low, external complexity cannot be coped sufficiently. The complexity management in 2.4. Strategies of advanced Complexity Management the company is, therefore, not effective. If internal complexity is too high, the company thus has unnecessary efforts and the In order to react on existing complexity within the complexity management in the company is not efficient [8]. mentioned complexity fields, different strategies were developed and can be applied. These strategies can aim either External Complexity Drivers Complexity Dimensions at manipulating the complexity or at coping with the existing complexity. Within this context five different strategies of Fields of Complexity Variety advanced Complexity Management can be distinguished: Heterogeneity x Avoiding complexity Dynamics Process Product Organisation NonͲTransparency x Reducing complexity

Cust om er- Technologies Network Generating of complexity portfolio x

Order Product- Dealing with complexity Production x processing portfolio x Pricing complexity IT-Systems Materials Personnel The avoiding of complexity follows the approach of Markets prophylactic prevention of the emergence of complexity. The reappearance of over-complexity has to be prevented by Fig. 2: Complexity fields and complexity dimensions proactive use of instruments. These include, for example, the modularization or standardization of products, processes or organizational structures [8]. Andreas Kluth et al. / Procedia CIRP 17 ( 2014 ) 224 – 229 227

Complexity reduction is about to reduce identified existing depending on the model, different stages of "maturity" of complexity target-oriented. This can be achieved by the business processes are described." [17] reduction of variety and heterogeneity, this means by the "Maturity models are using a staging system, which simplifications in the various fields of complexity. This represents the performance of a specific area of a company. includes, for example, the elimination of unprofitable product These stages are pre-defined by the maturity model." [18] variants, the reduction of non-value added process steps, as In literature as well as in practice different existing well as the reduction of interfaces, both on the side of the IT- maturity models have been established in different fields of systems as well as from an organizational perspective [8]. application: Also specific resetting mechanisms can be used, in order to x Maturity models in the fields of project- and process reduce complexity and to restore the desired state of operation management; of a system [11]. As described before, in some cases internal complexity x Models based on quality management and tools from within the company is lower than the corresponding external the field of (SW) development; complexity on the market (internal complexity is not x Maturity analysis models to check status of business effective). Therefore, the generation of complexity is needed processes. to increase and to adjust the internal complexity of the company. For example, if a company produces products with The most prevalent approach for measuring the maturity low complexity, which are not “state-of-the-art” in terms of level is the Capability Maturity Model (CMM) of the market demands, then these products are not marketable. Software Engineering Institute (SEI) of Carnegie Mellon The dealing with complexity is aiming at the efficient University [19]. The Capability Maturity Model is the oldest coping with unavoidable internal complexity. This includes and best known model applied for the improvement of the adaptation of organizational structures, the increase of software processes. Its five-step evaluation scheme was transparency in order processing or transformation of the originally intended to evaluate the quality of software process interfaces [8]. processes of software suppliers of the U.S. Department of Pricing of complexity describes the reasonable pricing of Defense [20]. The maturity levels of CMM are used as an products and complexity. Companies have to analyze with indicator for the capability of an organization in terms of what products they make money and with what products they developing and providing software with the required quality lose money. After it is identified, which complexity affects and financial requirements within specified time frames [21]. enhancing / lowering in terms of profitability and which In subsequent years this model has been enhanced and several complexity promotes / disables the asset management, upgraded versions were released. Finally the successor model, companies can allocate this arising complexity to their the Capability Maturity Model Integration (CMMI) was product prices for example, if customers are willing to pay for developed. The CMMI consists of five basic different that. This is not always suitable and easy to implement. maturity levels (see Fig. 3).

5 3. Maturity models fundamentals Focusoncontinuous Optimizing process improvement 4 Maturity models are based on the assessment of Quantitatively Process measured Managed and controlled 3 competency objects aiming at consistent and verifiable Process characterized Defined for organizations and statements about these objects` status and quality of their is often proactive 2 execution. Frequently used objects are organizations and their Process characterized Managed for projects and is processes [12, 13, 14]. Over the past years different maturity often reactive 1 Process unpredictable, models have been used in different fields of application. The Initial poorly controlled and different levels/stages of maturity within such existing models reactive are used to describe the different achievable skill levels. Therefore, on the one hand maturity models include methods Fig. 3: CMMI maturity levels [22] for the assessment of skill levels, on the other hand they provide measures to increase the degree of maturity from one In CMMI several previous models with the same basic level to the next one. After the introduction of such measures ideas and goals, but different in structure and field of in order to increase the maturity level, these models are also application, are integrated. The main fields of application of suitable for measuring and evaluating the progress made [15]. the CMMI Model are [23]: Maturity models can be used for different purposes. x Software Engineering Maturity models may be limited to a competency measurement or can be part of a skills analysis. Additionally x System Engineering they can provide information about causes of the maturity x Integrated Process and Product Development level deficits or can propose instructions for solutions to improve the maturity level [16]. Different definitions of Another validation model is the so called EFQM Business maturity models can be mentioned: Excellence Model, which is not a classic maturity model, but "A maturity model is a (simplified) representation of often used as a basis. EFQM stands for European Foundation reality to measure the quality of business processes. Here, for Quality Management and describes the merger leading 228 Andreas Kluth et al. / Procedia CIRP 17 ( 2014 ) 224 – 229

6 Harmonized from the top European companies with the aim of developing (internal and external complexity are harmonised) and providing its own model to increase their competitiveness 5 Managed in global markets [24]. (measures are defined and initialized)

The EFQM Business Excellence Model is a model for the 4 Analyzed integrated quality management and it is based on the (complexity patterns are generated) 3 Quantitativ simultaneous consideration of people, processes and (quantitativKPIsare elaborated) outcomes. It consists of three main pillars of leadership, 2 Qualitativ processes, and business results and is supplemented by (complexity qualitatively evaluated)

specific implementation areas (people, policy and strategy, 1 Defined resources, etc.). In addition to the three main pillars and their (complexity fields are defined) 0 Initial subdivisions, that are individually highlighted and weighted in (no complexity understanding) relation to the overall model, the EFQM Model is divided into the areas of enablers and results. All input factors, which are Fig. 4: Maturity levels for advanced Complexity Management systems used to achieve the desired results, can be seen as enablers [24]. If the EFQM Business Excellence Model will be 0) Initial: No understanding of complexity compared to the former described CMMI model, then the The company has not yet concerned or recognized any commonality of definition and improvement of processes is complexity problems or strategies visible. The other aspects of the EFQM Model are only 1) Defined: Complexity fields are defined considered rudimentary in the CMMI model [23]. The company has identified external complexity drivers Another Model is the so called SPICE (Software Process and has defined the internal complexity fields. Improvement and Capability Determination), the international standard for process evaluation [25]. It was initiated in 1993 2) Qualitative: Complexity is qualitatively evaluated In order to support the development and validation of a The company uses methods to evaluate existing practical international standard for software process complexity within the different complexity fields in a improvement. The initial versions focused exclusively on qualitative way. software development processes. In later versions, it was 3) Quantitative: Quantitative KPIs are elaborated enhanced to cover all processes related to software life cycle, The company has elaborated specified Key Performance project management, configuration management and quality Indicators (KPI), in order to quantify the existing assurance [26]. The approach of the SPICE Model can be complexity in terms of the four complexity dimensions. used for process improvement as well as for capability determination [27]. The SPICE model enables organizations 4) Analyzed: Complexity patterns are generated to use the standard for process capability determination mode, The company has analyzed the existing internal process improvement mode and self-assessment mode [28]. complexity and generated so-called complexity patterns by As other international standards and models, SPICE takes into detailed analysis of the complexity fields and dimensions account the evaluation of the capability, effectiveness and based on the correlation of specific, selected indicators. quality of processes and organizations. 5) Managed: Measures are defined and initialized The company has defined and initialized specific 4. Overall maturity based approach for evaluation of complexity cultivation strategies in order to adapt or complexity management systems master the existing internal complexity. The following approach is based on the assumption that 6) Harmonized: Internal and external complexity are predictable patterns exist in the development of complexity harmonized skills. These development patterns are conceptualized as The company has optimized their internal complexity evolutionary stages or levels and represent the mutually according to the external complexity on the market and the defined maturity levels. The maturity implies evolutionary company is able to dynamically adapt and adjust it progress in demonstrating specific skills or achieving targets, permanently. from an initial state where few skills regarding complexity management are considered, to a final state, which is Each defined maturity level as part of the advanced complete, optimizing the company`s resources to achieve the Complexity Managemet addresses deficits in existing goals of harmonizing internal and external complexity [29]. complexity management approaches: Each level describes different degrees of maturity General complexity fields are known, but not defined in regarding the complexity management system. Each maturity more depth and formulated in detail. Various evaluation level is defined by specific characteristics and also predefined approaches exist, but generally related to product complexity. requirements that are necessary to achieve the next level of Specific measurement of complexity is rather rare. Mostly the maturity. In general, it can be assumed that a higher degree of cost considerations are in focus. Usually only general maturity shows a better expression of the rated processes and strategies (avoidance, reduction) are used, but no thus the underlying complexity management capabilities. combinations or new strategies are introduced. There are no This approach follows the basic structure of CMMI and concrete approaches to measure external complexity. has a total of seven maturity levels (see Fig. 4): Andreas Kluth et al. / Procedia CIRP 17 ( 2014 ) 224 – 229 229

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