Supply chain simulations deliver the answers to complex questions

The best supply chain managers are always thinking about what could go wrong. They institute policies to ensure things go right, of course, but they’re always probing, trying to find the faults in their plans. With suppliers and facilities spread across the globe, there are a lot of links in most supply chains, and a lot of ways they can break. To help discover those flaws and determine how to fix them before it’s an emergency situation, the best supply chain managers run simulations to manage risk. They figure out what could go wrong, then fix it before it does.

Before There’s A Problem

While Covid provided the biggest supply chain disruption any of us has ever seen, it was – we hope – a rare event. Natural disasters, meanwhile, are a yearly occurrence. They’re something supply chain managers will have to deal with at some point. What if a hurricane took a factory offline, or closed a major port or highway? How would your organization respond? Resilinc’s Hurricane Simulation Model can help provide answers to key questions that will form the basis for an emergency plan. Running through various scenarios in a supply chain simulation provides the knowledge necessary for quick, effective decisions that will reconnect the links in the chain or form new ones when disaster strikes.

The best supply chain simulations help in four areas: identification of the threat, assessment, mitigation, and continued monitoring. Models like SCM Globe’s use predictive data analytics to pinpoint areas of risk and highlight the severity of potential disruptions based on different risk appetites. Supply chain managers then work with the AI models to test various adjustments, such as increased inventory levels or decreased costs, to determine the right course of action under a given set of circumstances. The models suggest which adjustments meet the organization’s goals, and supply chain managers implement them, either wholesale or little by little, to set the organization up for success. As more real-world data becomes available users can input that into the models, improving their performance and the simulation’s.

“The end-to-end perspective allows the simulation and evaluation of the ripple effect of any risk in any node of the supply chain, capturing the dynamic nature of supply chain risks over time,” SCM Globe commented.

Planning & Adjusting

Of course, natural disasters are just one example of a supply chain disruption. There are many other possibilities, some, like weather, that are entirely outside a supply chain manager’s control. Others, however, are more manageable and easier to measure the effects of. Demand fluctuations aren’t always predictable, but the release of a highly anticipated new product – especially with high profile endorsement – is sure to bring a demand surge. Other things more within an organization’s control are the suppliers they work with and the state of their cybersecurity. Supply chain simulations can test the reliability of both, showcasing cyber vulnerabilities and areas where having a single supplier for a key component can add unnecessary risk. They can also find cases that prevent organizations from surpassing their ESG goals.

Optimization simulations like anyLogistix can show the effects of such changes in key areas like delivery times and production costs. They can show supply chain managers the optimal levels of inventory to keep on hand and the best methods of distribution that avoid bottlenecks to get orders out in a timely fashion and have more stock ready to go as high demand persists. Real-time data updates allow supply chain simulations to provide timely guidance on the fly, keeping organizations resilient and flexible.

Paul Baldassari, president of manufacturing and services with manufacturing and supply chain solutions provider Flex, pointed to simulation technology’s ability to run multiple thousands of scenarios, testing variables and constraints to match the right tech to the right process. For one client, the use of a digital twin helped optimize production scheduling to make ambitious production goals, increasing efficiency and slashing change over time.

“This project reaped multiple benefits for the customer by implementing simulation, including time savings, operational benefits, technology benefits, business benefits, and project management benefits,” Baldassari told McKinsey.

The digital and physical worlds come together in supply chain management, where simulations in the former lead to changes in the latter. For supply chain managers, simulations deliver the best of both worlds.