How scenario simulation helps you to build an agile supply chain configuration?
Imagine that you are the Chief Supply Chain Officer of a manufacturing company that receives orders from its customer. Every single order from your customer must adhere to specific quality standards and may have a different level of complexity and value. Your globally distributed suppliers are specialized in producing the critical sub-components that you need to fulfill that order. Your customer also copes with the turbulence and volatility of market demands, cost variability, and globally distributed competitors.
However, lead times can strongly vary depending on market conditions, transportation, material availability, and prices. New competitors are accessing the market and the demand for your products fluctuates due to changes in the demand of your customer. How will you manage this complex situation in terms of supply chain configuration? How will you predict the impact of demand and lead time uncertainty on your logistics performances and cashflow throughout a reasonable time-horizon? How will you gain the trust of your customer in a way that you could maintain your reliability and competitive position within its value network?
The challenge is to proactively manage the uncertainty about future demand requirements and volumes while being able to adjust or even re-engineer internal processes as well as the relationships with customers and supply chain partners in response to sudden changes or supply chain disruptions
Solution
Take the guesswork out of your supply chain network. Reduce uncertainty in your decision-making process. A data-driven model gives you immediate information about service coverage, lead times, and facilities. Scenario simulation provides additional insurance and a cost-effective decision-making tool for managers.
For instance, you can detect demand patterns generated from historical data and regular forecasting. Based on these forecasts, you can simulate the procurement of materials throughout a given time horizon. This results in a dramatic reduction in inventory and production costs through the prediction of the most likely sourcing needs and monitoring the actuals. Over time, a realistic estimate of the levels of inbound and outbound material flows can have a positive impact on cash flow, working capital, and available resources.
Going a step further, simulating a new manufacturing technology or additional production resources will support the rightsizing of plants and the identification of resource conflicts. Drilling down to different components and drivers in a virtual and safe environment of your supply chain unlocks the real added value. You can estimate the exact cost-to-serve of delivery points. It also provides accurate insights into the changes for individual customers or suppliers if certain events occur. This will not only lead to a reduction in operational spend in a more sustainable supply chain network, it will also allow the sales department to develop differentiated pricing methods.
Benefits
These examples clearly show the potential of scenario simulation in terms of cost advantage and customer value. It will significantly enhance the competitiveness of your business by adding more resilience and flexibility in your supply chain network in its optimal configuration.
You can deal with a sudden and high priority increase of order quantities and a boost in future sales opportunities. You will be able to predict the impact of delayed fulfillment of orders in progress. And you get a clear view of additional costs from new orders.
More importantly, it will allow you to forecast the related benefits in the medium-to-long term as well as the potential resource needs for maintaining the existing customers while fostering the company growth.
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