Stress tests for the next supply chain disruption

A crisis like the 2020 pandemic often highlights underlying systemic weaknesses, and the pandemic has certainly put the fragility of our supply chain at the center of the picture. In recent years, we had seen earlier regional disasters, such as the 2011 earthquake and tsunami in Japan, causing global ripples in the supply chain, which highlighted existing weaknesses in our trading networks. interconnected. So when these “potential” global supply chain problems became very real, most industry professionals were not surprised by its fragility. After all, managing lean supply chains with low inventory and just-in-time delivery was a feature, not a bug.

It would be easy (and incorrect) to undo today’s challenges in the wake of a once-in-a-lifetime health emergency, with a variety of rare factors that have mixed together to create a perfect storm of lost production and transport costs, drastic changes in demand and unpredictable payback times. But I think it’s also instructive to focus on just one event of the past 18 months: the blockage of the Suez Canal. One of the busiest trade routes in the world was completely blocked for almost a week because only one ship ran aground. This is not a black swan event; it could happen again. Even in a pre-pandemic economy, this unique event would have created weeks of ripples across the global supply chain.

The fragility of the global supply chain has never been more evident than it is today, and it is time to focus our efforts on more than just restoring our previous capabilities. Instead, we need to create new levels of resilience in our supplier and stakeholder networks. These capabilities require careful consideration of how we collect and use data from across our network, as well as investments in digitization that can enable businesses to predict and pivot in the event of a disruption. I believe that strategic investments in virtual twins and the IT infrastructure that powers them are the key to ensuring the stability of the supply chain and creating opportunities for growth when the next crisis strikes.

Visibility & Flexibility

It’s safe to say that the supply chain is no longer an overlooked or underrated part of the business. Over the past decade, the explosion of e-commerce and consumer expectations has collided with natural disasters and geopolitical uncertainty in our world, and the C-Suite has begun to consider robust supply chains. as real strategic differentiators. The pandemic has served as an accelerator, putting the supply chain at the top of the list for every business leader. An IDC survey of IT spending in the midst of a pandemic found that 57% of those polled had their supply chains “significantly affected,” while 27% said they anticipated a business chain disruption soon. supply.

The IDC survey also highlighted ‘resilience’ as a major supply chain concern, closely followed by a lack of digital skills to shift supply chains to new business models. The resilience of your business dictates whether the gap between a business downturn and its eventual recovery will be a wide canyon or a small trench that can be overcome by smart decisions informed by the right information. But these survey responses indicate that many companies don’t believe they have the right digital tools or expertise to pivot their supply chain operations in the face of disruption or changes in business focus. (eg the ability to shift the production of paper products to nasal swabs).

This inability to react quickly to change is a problem that needs to be addressed. By using virtual environments to create a collaborative system where all stakeholders can see what happened in the past and what is happening now, companies can create simulations to analyze and optimize their path to the future and find the resilience to weather an upcoming storm.

Find the data

A virtual twin is typically associated with virtual replicas of physical machines, such as a workshop assembly line. If you already have a network of IoT sensors in your workshop or assembly line providing real-time operational information, you are off to a good start. Applying the virtual twin concept to the supply chain requires extending these IoT sensors and data capture methods beyond the walls of your manufacturing or distribution center, and into warehouses and suppliers to track. stocks and transit times.

When you start to capture real-time data from your suppliers, it’s time to set goals for your virtual supply chain twin, which can be a daunting question. As always, the first critical analysis should focus on the business goals that have the highest priority, and let those priorities determine your goal. For example, industries where product innovation is accelerating and time to market is the key factor would have different priorities than fast growing industries (such as battery cell manufacturing) where a chain procurement may need to accelerate quickly to support new facilities.

Armed with predictive data and a robust virtual twin of their supply network, decision makers can begin running simulations to test the organization under pressure. Of course, virtual twins can also provide insight into overall process optimization, but in our post-pandemic mindset, business leaders would be wise to use these virtual twins to address certain scenarios “and if “. Testing the granular constraints of resources, materials, and bottlenecks is essential for contingency planning. Remember to address not only potential disruptions to your supply, but also to your demand, as we have seen that the buying habits of businesses and consumers can change dramatically during a crisis.

Technology is not a silver bullet for a resilient supply chain, but the right IT infrastructure is certainly essential. It is important to stress that the effectiveness of your supply chain virtual twin depends on the quality of the data fed into the model. As your business gains visibility and the ability to simulate supply chain scenarios for resilience, it is also possible to gain strategic insight into the business. For example, Latécoère, a tier 1 partner in the aeronautics industry, was hampered by bottlenecks in components from external suppliers. Following a simulation of the company’s supply chain and seeing the effects of adjusting the interconnected variables of their production and distribution facilities, Latécoère determined that the move to in-house component manufacturing would be the most profitable strategy. With data to support its decision and a virtual twin to guide the construction of new production lines, Latécoère has invested in its own manufacturing capabilities and its supply chain has remained stable.

Plan for everything that comes next

Until 2020, we had not fully thought through how our interconnected global economy would respond to widespread and prolonged stress. As the pandemic recovery continues, now is the time to invest and new best practices. Perhaps it is time for companies to consider the merits of focusing more on resilience rather than raw efficiency or keeping additional inventory in the system “just in case” rather than “just in time” “.

But the lessons we learn are not going to change the fundamentals of our industry. If supply chain managers have the agility to both proactively and reactively respond to an interruption in demand or supply and can present that information to decision makers sooner than anyone else, that business will have competitive advantage. Virtual twins provide the framework for stress testing for the next global disruption. Whether it’s a stranded ship causing a global traffic jam or a natural disaster, companies that invest in resilience will be able to make adjustments and emerge from the crisis stronger than before.

Eric Green, Vice President Marketing of Dassault Systems, brings 27 years of manufacturing, supply chain and enterprise software experience to its role of managing DELMIA user experience, brand marketing and business development. Under his previous leadership at Apriso Corp., marketing, industry and solution development have significantly contributed to Apriso’s growth and leadership in the manufacturing operations software market.

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