Supply Chain Management and the Challenge of Organizational Complexity – Methodological Considerations Stig Johannessen 1 Introduction – Methodology ......................................................................... 60 2 Systems Thinking – A Dominating Position in SCM ................................... 60 3 Radical Process Thinking and Complexity................................................... 64 4 Implications for SCM ................................................................................... 68 5 Conclusions................................................................................................... 71 6 References..................................................................................................... 71 Summary: The dominating organizational perspectives within supply chain management (SCM) are firmly based in a methodological position of holistic systems thinking. From this perspective, it is argued that activities in organizations are best under- stood and developed when seen as holistic systems, where the various subsystems and processes are seen to interact and constitute a whole. However, holistic sys- tems thinking fails to provide convincing explanations for the change phenomena many people experience in logistics-oriented organizations. Recent organizational complexity research challenges the systems perspective and argues from an onto- logical position of radical process thinking. Organizational activity is described in terms of processes of local social interaction, creating further interaction and patterns of action with global effects. The causes and explanations are to be found in the experience of these processes and not in some kind of system. There are profound implications from this shift in methodological orientation for organiza- tional research in SCM. Keywords: Supply Chain Management, Methodology, Systems Thinking, Radical Process Thinking, Organizational Complexity 60 S. Johannessen 1 Introduction – Methodology One of the foremost methodologists in the social sciences, Herbert Blumer, talked about the methodology of science as the study of the principles which underlie scientific inquiry (Blumer, 1969). This definition implies that methodology reaches into the philosophical provinces of logic, epistemology, and ontology. Blumer’s critique was aimed at those who would equate method with methodo- logy. They represent a belief that the essential character and principles of scien- tific practice are already established and the task narrows to one of application, which essentially is a technical problem of translating scientific method into spe- cific procedures (Baugh, 1990). This is also very much the situation within the fields of logistics and SCM (Mentzer & Kahn, 1995; Seaker et al. 1993). The debate is often about the contrast between qualitative and quantitative methods and the importance of particular approaches, for instance, case studies (Ellram, 1996) or action research (Naslund, 2002). However, Mears-Young & Jackson (1997); Johannessen & Solem (2002); and Arlbjorn & Halldorsson (2002) provide discussions more focused on the un- derlying ways of thinking about knowledge creation and research within logistics and SCM. The present paper is an attempt to contribute further to such discussions. Building on Blumer’s definition of methodology, the following will be a reflection and an interpretation of the origin, emergence and problems of systems thinking, which is the dominating ontological and epistemological position within the field of SCM today. This will then be contrasted by a different perspective - radical process thinking - which is the position adopted in the recently developed organizational theory of complex responsive processes. The implications of such a shift of meth- odological position and theoretical foundation are discussed with respect to man- agement competencies and research method. Finally, some thoughts on future research issues are put forward before making some concluding remarks. 2 Systems Thinking – A Dominating Position in SCM 2.1 Systems Thinking Johannessen & Solem (2002) describe the ontological and epistemological under- pinnings of logistics and point to two systems perspectives. One is a reductionist mechanistic systems perspective (Taylor, 1911), and the other is a holistic systems perspective (von Bertalanffy, 1968). These different perspectives have emerged through history and have led to various ideas, principles and practices about how SCM and Organizational Complexity 61 organizations oriented towards creating value through an effective flow of materi- als, products, services and information, should be organized and managed. The two systems perspectives correspond to two organizational paradigms held in logistics and SCM (Christopher, 1998). The “old paradigm” is the organizational thinking typical of the functionally oriented mass-producing industrial companies. Here, logistics is seen to be one of many functions, sometimes with its own de- partment. The “new paradigm” is to organize according to business processes that cut across functional departments. Such business processes incorporate precise, time- effective and cost-effective ways of supplying a product or a service to a cus- tomer. Linking these business processes externally to include several companies in a supply chain or a network brings about the need for effective supply chain man- agement (Hammer, 2001). It is assumed that this is achieved by looking at the supply chain as a whole sys- tem, which in turn requires an “overview” of the organizations and their business processes. Thus, to move the organizations from a functional orientation towards a business process orientation is simultaneously a shift from a reductionist to a ho- listic way of thinking about systems. Stacey et al. (2000), Griffin (2002), and Stacey (2003) demonstrate how holistic systems thinking originates from the thoughts of the German philosopher Imman- uel Kant. From the 1940s and all the way up until the present day, these thoughts have emerged as dominating ideas in organizational thinking. This origin is there- fore of prime importance for a methodological discussion on logistics and SCM. 2.2 The Origins of Holistic Systems Thinking Kant was trying to resolve a debate in his time concerning the nature of knowl- edge where on the one hand scientific realists, building on Descartes and Leibnitz, claimed that external reality exists and we are capable of directly obtaining knowledge about this reality. Science was simply understood to be the true knowl- edge about nature obtained by using the “scientific method” where the individual scientist objectively observes nature, formulates hypotheses about the laws gov- erning it and then tests these laws against quantified data. Opposing this point of view were the radical skeptics, building on the Scottish philosopher David Hume, who claimed that we cannot know reality directly. Knowledge is relative and unreliable. Ideas result from connections in experience, not from independent reality, and intelligibility reflects habits of mind, not the nature of reality. 62 S. Johannessen Kant’s answer to this controversy was to construct a dualism agreeing with both the scientific realists and the radical skeptics. His view is that on one hand there is reality and on the other hand there is the appearance of reality. We can never know reality itself, but only the appearance of reality as sensation. In talking about living organisms, he saw both the parts and the whole emerge from internal interactions and unfolding what has already been enfolded in them from the beginning, as if there was a purpose for an organism to move towards a mature form of itself. By this, Kant introduced a causality that was formative rather than the linear, “if-then” causality assumed in the mechanistic way of un- derstanding nature. With regard to human action, Kant held that humans are autonomous and make rational choices. In posing this he introduced a rationalist causality for explaining human behavior. So, nature develops according to a formative causality, where it unfolds what is enfolded through internal interactions. And human action follows a rationalist causality where people can make individual free choices. Humans and nature follow a dualistic causality. When modern organizational theory developed after the 1940s, it did so at the same time that modern systems thinking developed in the form of cybernetics, general systems theory and systems dynamics. The ideas of Kant were now slightly changed and directly applied to human action. Organizations were thought of as systems with humans being the parts. By the interaction of the parts (hu- mans), the system (organization) could unfold its enfolded nature (purpose). In order to explain change, one must resort to autonomous individuals standing out- side the organization and making rational choices for the organization. These individuals are of course the leaders. 2.3 Problems with Holistic Systems Thinking In holistic systems thinking the duality of being able to be both a part of the or- ganization and also stand outside it is resolved by locating such contradictions in different spaces and time periods, in accordance with the dualistic thinking of Kant. Different spaces are created in the spatial metaphor of a whole separated by a boundary from other systems, or wholes, which leads to the image of an “inside” and an “outside” of organizations. Different time periods are created by leaders seeing themselves