In March 2000, a fire struck a semiconductor plant in New Mexico, leaving Ericsson Inc. short of millions of chips that the Swedish telecom giant was counting on to launch a new mobile phone product. As a result, Ericsson was ultimately driven from the market (it would later re-enter through a joint venture with Sony Corp.) while its rival Nokia Corp. flourished. Ericsson had failed to recognize the New Mexico plant as a bottleneck in a complex, interconnected global supply chain.

Ericsson is not the only company to suffer a catastrophe due, in part, to the complexity of its own systems. In February 1995, Barings Bank, Britain”s oldest merchant bank (it had financed the Napoleonic wars, the Louisiana Purchase and the Erie Canal) went from strength and prestige to bankruptcy over the course of days. The failure was caused by the actions of a single trader – Nick Leeson – who was based in a small office in Singapore. Soon after Leeson”s appointment as general manager of Barings Securities Singapore, he used a secret account to hide losses he sustained engaging in the unauthorized trading of futures and options. The complexity of the Barings systems enabled Leeson to fool others into thinking that he was making money when in fact he was losing millions. But after the January 1995 Kobe, Japan, earthquake had rocked the... To read the complete article, login or sign-up using the form below.