If we didn’t know what real supply chain disruption was before, we do now. Events over the past 18+ months (COVID-19, Brexit, Suez Canal blockage, India-China border conflict, natural disasters, cyberattacks on pipelines and shipping lines) forced companies to find new ways to deliver goods and services, secure alternative sources for needed materials, and simply determine how to survive. With disruptions becoming a new normal, what can we expect in 2022 and beyond?
One thing is certain. Companies that proactively plan for disruption position themselves for long-term success and strengthen their ability to weather storms. Conversely, organizations that don’t adequately prepare for disruption compromise their sustainability and capacity to respond quickly and effectively to threats and opportunities. This leaves leaders with a choice to make – either assess disruptions reactively as they surface, or plan for disruption in a way that increases competitive advantage.
The Trouble with Traditional Approaches
Historically, supply chain disruptions have been examined sequentially – demand, then supply, and so on. Sequential approaches, however, silo activities and limit visibility of next steps. Arguably, their biggest deficiency is that they do not show how actions taken in one area would affect other areas. Disruption doesn’t impact just one area. It affects every part of a business – production, customers, financial policies, work models, and more.
These approaches also leverage multiple tools, each designed to solve an isolated issue. Examples include transportation tools that aim to minimize mileage and manufacturing tools that focus on maximizing throughput. These tools make assumptions about what’s best for the business in the context of a narrow objective and are not equipped to holistically examine options that could produce a better overall result. Attempts to answer holistic questions using this approach drive more work for planners, introduce errors, and slow decisions.
Lastly, traditional approaches to supply chain disruption possess limited intelligence that is based largely on human intuition and rules. This is acceptable if one’s business environment is consistently static. But when the world is constantly changing, a dynamic and more powerful approach is required – one that can synthesize one’s full array of objectives, constraints, underlying economic models, and more to address factually and holistically what should be done when, not if, disruptions arise.
Digital Twin and Disruption
Unlike traditional approaches, a supply chain digital twin fully mirrors one’s entire value chain, uses real-time or near real-time data from multiple sources, incorporates all key relationships and variables, adapts as conditions change, and reflects multiple time horizons to inform actions. It processes the combined complexities of the value chain to quickly reflect the impact of different events or strategies in the form of plans and what-if analyses. Further, it translates this into not only operational impacts (e.g., fill rates, capacity utilization, mileage consumed, inventory, financials) but powerful visualizations that illuminate options, unlock high-impact opportunities, and solidify decisions. Philip Morris International (PMI) serves as an excellent example of using a digital twin to mitigate disruption and unlock competitive advantage.
See the full presentation from River Logic, Transnova, and Philip Morris on “Building Supply Chain Resilience and Minimizing Disruption” here
Upon deciding to accelerate the transition from combustible cigarettes to smoke-free products, PMI faced a huge challenge – how to meet the needs of its ~175 markets supported by ~40 company-owned and 28 third-party manufacturing sites while also meeting the time-and financial-based targets set forth by leadership. Historically, PMI approached such analyses from just an operational point of view with a dizzying array of Excel and SQL databases on an annual basis that looked, at most, 15-18 months into the future.
Given the complexity and growth challenges the product transition presented, PMI needed a deeper, and more dynamic approach to simulate scenarios and market stressors much more frequently without having to focus a team of analysts for weeks at a time on a small set of parameters. In short, PMI needed the ability to look into the future as much and as deeply as they desired to answer a myriad of what-if questions to determine the optimal way to advance.
With a digital twin, PMI has reduced solve time to less than 2 hours, now readies new studies in less than 5 days, and cut the number of excel files that feed their models by more than 90%. To date, they’ve uncovered more than $600M MIO opportunities over 5 years, optimized footprint and sourcing, and doubled delivery among other notable accomplishments. The company has also been able to escape opinion-heavy decisions and instead advance data-backed actions.
Embracing Change and Acting with Intention
It should come as no surprise that supply chain disruptions are going to persist and evolve throughout 2022 and beyond. This should not, however, dictate that companies are powerless to stave off the same types of negative impacts wrought by the events of the past 18+ months. Organizations that elevate their ability to plan for and mitigate disruption will find themselves ahead of the pack and better able to weather the storms that will undoubtedly come their way.
With a digital twin, organizations can now quickly and thoroughly evaluate a wide set of scenarios using real-time data to determine how their supply chain will perform and be impacted under different conditions. Management can then apply these insights to make fact-based decisions that optimize supply chain performance and maximize results and returns.
To learn more about applying a digital twin to turn supply chain disruption into a competitive advantage, get in touch with us today.