Supply chains need to be digitalized to become resilient not to just react and respond. Predicting potential issues and being ready is very different from virtually running around performing what-if this and what-if that! Resilience means having the capability for the system to adjust and recommend what to do and what the expected outcome is. For the supply chain to be resilient, the right policies need to be in place and for the system to be in place and for the system to be intelligent enough to be prepared by having the right level of risk-preparedness.
Obviously, we always respond to events. The real question is how prepared we are to avoid the issues in the first place. Or what the quality of response is? What are the alternative solutions, and do we have a model that is comprehensive enough to recommend the optimal action? For the system to know what to do, it needs to know very accurately all the options and details of the supply chain. This means alternative methods of making and delivery, substitute parts, priorities, demand trends, available inventory, capability to promise and what mix of products to make to maximize profitability and so on. S&OE enables this by creating an intelligent digital twin.
An interesting analogy is an airplane cockpit simulator. It is a digital twin of the airplane operation in the air. Unless it is accurate enough to represent the true environment, it cannot possibly show the pilots what can happen during a turbulence and what options are available to them. A rough model of supply chain such as that used in today’s S&OP solutions simply gives you a high level of the potential issues and leave it to you to come up with an answer when and if an event big or small occurs. This means hours of what-if analysis, with millions of variables to come up with a solution. To continue with our analogy, S&OP only give you the expected flight path and direction and not much about how to get there. Not exactly an autonomous supply chain planning solution, and not a resilient supply chain when one needs to react unprepared for the event.
You may ask, what is the solution? First and foremost an accurate model that we can rely on so that good decisions can be made by the system. In its absence, you are flying in the dark without instruments. That is why S&OE is the key to building models accurate enough to depend on, to have a resilient supply chain and for the system to be able to learn and grow as your business changes and grows. As we have discussed in a previous blog, in addition to model accuracy, we need two more ingredients for the system to be autonomous: data and intelligence. For more information on autonomous planning and digitalization of supply chains click Here.