Supply Chain Real-time Decisions for Higher Agility
According to Gartner research, a sizable number of supply chain leaders are predicting that: “over 65% of short-term decisions within supply chain planning will be automated or autonomous.” Short term decisions fall into the category of S&OE and the ability to respond to disruptions. Examples are the late arrival of supplies, equipment breakdown, weather issues and port shutdowns amongst many others.
S&OP systems are not designed to help with these situations and by the time you run scenarios and try to respond manually, it would be too late, or a decision is made which is financially and operationally suboptimal.
The number of choices that you have is simply in the millions, given so many variables in the supply chain such as customer priorities, cost and revenue of each alternative, delivery performance, number of part numbers/products, commitment to distributors/customers and alternate modes of transportations etc. A manual process to try and find a timely solution to a disruptive event is far from making a sound decision. An inferior decision would in fact create disruptions on top of disruptions.
Systems, with the right modeling capability and intelligence, can understand the impact of each event and evaluate millions of alternatives so that a much more optimal decision can be made in real-time. At the same time, they can reflect the financial consequences of decisions and alternatives that are recommended to the end-users. In order to do this, systems need to have a digital twin of the supply chain.
S&OP solutions are designed for long-term planning, and they lack a proper digital model. Having weekly or monthly periods to reflect capacity, for example, is far from a digital twin representation, not having enough detailed understanding of the operations, cannot make short term decisions when disruptions occur. As a result, agility and resilience suffer.
Users are now energized by the fact that they have better visibility because they are getting real-time information from suppliers, shippers, weather-related information and so on. This is all good, but getting information this fast in real-time requires fast decision-making in real-time. Otherwise, what is the point if you get inundated by information? A good analogy is the stock market where real-time information comes from all sources. The winners are the ones who can take the information and run algorithms to make fast decisions. Can you imagine manual adjustments by just having “visibility” when hundreds of billions of dollars are at stake? Your supply chain is no different with billions of dollars of goods flowing, every decision could have millions of dollars of implications in the short term as well as long term.
Planning with S&OP is good and necessary. However, it is not designed to respond to a continuous barrage of real-time events hourly and daily. Intelligent short-term decisions, provided by S&OE and supply chain digital twin can provide much higher benefits in service levels and the financial outcomes of the company.