Scenario simulation is nothing new in supply chain. Practitioners have long heralded it as a sign of a mature sales and operations planning (S&OP) process. And it is. Having the ability to model and simulate the impacts of a change in your supply chain — whether it’s a sudden increase in demand, the loss of a key supplier or an unexpected capacity constraint — is a critical success factor. Asking ‘what-if?’ is commonplace.
But while a supply chain planning (SCP) revolution is beginning to take hold thanks to Industry 4.0 and SCP 4.0, some companies are still using scenarios the same old way. In a world as fast paced as ours, is it really still acceptable to wait on results and not leverage scenario simulation software?
Speed equals success
The creation of what-if scenarios should happen in the blink of an eye. Anyone on your team should be able to simulate anything at any time with unparalleled speed. It’s what lets you make better supply chain decisions, faster. Imagine having to wait hours or even days to understand the full impact of a change. Think of all the ramifications each extra minute could potentially have on your bottom line.
A recent paper by SCM World, Concurrency: Embracing the Death of S&OP, outlines how what-if simulation is a foundational capability of concurrency, which is ushering in a new era of supply chain planning where you can simultaneously and continuously plan, monitor and respond in a single environment across all business functions.
Author Matt Davies says the next generation of scenario planning will “… increase the frequency of scenario analysis, connect the humans involved in and impacted by the scenario, and create a broader organizational ability to ask the right questions of the data.”
Collaboration is critical
As Davies notes, there needs to be human involvement in simulations and what-if analysis. And I’m not just talking about the one individual who created and ran the simulation. When it comes to responding efficiently to supply chain changes, it requires seeing the complete picture and knowing the impacts across the entire value network.
Very rarely is it a case of running a simulation, deciding it’s the best course of action and then committing the change independently. Or if it is, you’re likely looking at some very angry colleagues. The reality is you’ll need to share your scenarios with those in other functional business areas to work out a compromise. You can’t rob Peter to pay Paul without at least letting Paul know he’s about to be shorted.
Another important message Davies gives about supply chain scenario simulation is how many organizations today are using separate systems for data manipulation, simulations and collaborative discussions. Bridging the informational and contextual gap between all these disparate systems compounds any existing speed problems resulting from a lack of computational power.
All of these activities should be happening in a single, unified system using one data set.
Questions should be unlimited
Recent technological advancements mean businesses are dealing with more data than ever before. Supply chains have to find innovative new ways of analyzing all of it quickly and efficiently. The path forward for what-if analysis and supply chain scenarios is the ability to simulate virtually anything – supply change, demand change, BOM change, business policy change, capacity change, pricing change and more. You can’t limit asking ‘what-if’. That question should be able to expand across data, working assumptions or business rules.
And you certainly can’t limit it based on computing power. Questions and scenarios are endless. Your supply chain system should allow thousands of simulations to be supported concurrently and holistically shared so you can make quick and informed decisions.
Technology has caught up. It is possible to model your entire data environment in seconds (regardless of size) to give you end-to-end visibility in your supply chain and mitigate risk. It is possible to test multiple scenarios and compare them to each other or to a baseline in a matter of minutes. It is possible to take action with a full and detailed understanding of the projected impact, not just an aggregated assumption. It is possible to make better decisions faster. You just have to rethink the way you ask ‘what-if’ and run scenario simulations.
Interested in learning more about the role scenario simulation plays in the future of S&OP? Download SCM World’s report Concurrency: Embracing the Death of S&OP.