The Corona crisis has disrupted many of the worlds’ supply chains, and left numerous organizations looking for strategies to cope with the situation we are currently in. It has shown that crises like these do not follow the monthly S&OP cycle, particularly in an environment with vastly increased volatility and uncertainty due to a global pandemic. In this rapidly changing environment, in which new information becomes available every minute, improving your reaction speed and reducing latency in your decision-making processes is of major importance when trying to gain a competitive advantage. An effective method to improve decision making under uncertainty is using the newly available data to create different scenarios and testing the rigidity of your response strategies to these possible scenarios. However, as supply chains can be highly complex, this is often easier said than done.
Dealing with uncertainties in the supply chain
Supply chains are most often long and complex but sensing and predicting demand patterns and uncertainties downstream is possible. As upstream lead times are higher, lot sizes are larger, and availability and frequency of data is much lower, different strategies are needed to deal with uncertainties in this part of the supply chain. Although scenario analysis has proven to be an effective method for dealing with uncertainty in the supply chain, as of today it is not a widely spread capability. One of the key reasons for the lack of this capability within organizations is the fact that most APS systems are not responsive enough to support these “what if” analyses. They generally lack the capabilities needed for easy modeling of the supply chain and different scenarios, as well as the necessary visualization- and comparison options needed to do a quick analysis to gain new insights within seconds. By introducing systems that allow the user to quickly formulate scenarios, evaluate them and use visualizations for easy interpretation, scenario planning can be easily incorporated into organizations and decision latency can be vastly reduced.
How Pro-S&OP can help you deal with uncertainty
In Pro-S&OP, which stands for Proactive Sales & Operations Planning, scenarios and risks can be evaluated through the use of a digital twin of your supply chain. To start off with, it is important to gain a thorough understanding of your supply chain and insights in the different risk factors that can impact the supply chain. By creating a digital twin of the supply chain, the potential impact of different sources of risk and the effectiveness of the response strategies can be analyzed and quantified. Using this type of risk analysis provides organizations with quick and easy access to easily interpretable visualizations of the possible impact of risk factors or opportunities, for example the impact of transport routes that are released after having been closed due to the pandemic. As these scenarios can be easily adjusted to new data, and thus new sources of risk, Pro-S&OP will allow organizations to detect early warnings, reduce their response times and improve their decision-making process in volatile situations.
The Corona crisis has shown us that major supply chain disruptions can be caused by unforeseen events we cannot control. Having the capability to perform scenario analyses can be of significant importance in a situation of crisis that we are currently in. Proactive Sales & Operations planning will enable your organization to quickly create meaningful insights in the risk your organization is facing, while keeping it simple and thus preventing analysis. This will enable you to better evaluate the rigidity of response strategies, vastly decrease your response times and make better motivated decisions, which is of major importance in a highly volatile environment.