As uncertainty in the global economy increases, there is renewed focus on resilience. During Supply Chain Media’s Webinar Wednesday, Alfons Willemsen and Menno Rustenburg from Involvation explain how to create a resilient and robust supply chain. IBP, including scenario planning, plays a key role in this. ‘‘We now have the tools to continuously run and analyse scenarios.’’
Uncertainty
Although the outcome of the Iran conflict is not yet clear, one thing is certain: the closure of the Strait of Hormuz will lead to disruptions in supply chains. ‘‘There is a great deal of uncertainty,’’ confirms Alfons Willemsen, partner at consultancy firm Involvation. ‘‘I hear many statements from companies that begin with the words ‘we should have’. We should have built up more stock. We should have created more spare capacity. We should have established better relationships with our suppliers. Those companies are too late.’’
Due to the uncertainty, there is renewed focus on the concept of resilience. ‘‘When a disruption occurs, the performance of the supply chain will collapse,’’ explains Willemsen. ‘‘Resilience is described by Professor Yossi Sheffi of MIT as the ability to recover after a disruption. Ideally, the company returns to the same or even a higher level of performance. Those who do this better and faster than the competition can gain market share or achieve revenue growth. They will emerge from the crisis in a stronger position.’’
Five competencies
Involvation has been exploring the concept of resilience for years. According to the consultancy firm, companies wishing to work on this need to possess five capabilities. The first is redundancy, or buffers in the form of stock, capacity or capital. Collaboration is necessary because joint decision-making leads to better decisions. ‘‘And flexibility is about options. Can I use different transport systems or can I use different components in my products?’’, explains Willemsen.
Visibility refers to access to up-to-date and accurate information, for example regarding stock levels or arrival times of incoming goods. ‘‘The final capability is agility. This concerns the speed with which companies can respond to changes. Short lead times and rapid decision-making processes are key to this,’’ says Willemsen. ‘‘If you look at your own company, you will find that certain capabilities are more or less well developed.’’
Time is essential
Time is an essential factor in achieving resilience. Anyone who wants to recover better and faster than the competition following a disruption will need to make better and faster decisions. ‘‘If it takes ages to gather the right data and information, that certainly does not contribute to a resilient supply chain,’’ says Willemsen. ‘‘Look at the five capabilities. The trick is to be prepared for when a disruption occurs. If you only start investing in those capabilities afterwards, you’re too late.’’
Scenario planning is essential for proper preparation. ‘‘These times force us to think in terms of scenarios all the time. If your company has the right scenario mindset and the right tools, you’re prepared for disruptions. Because then you’ve already run through the right scenarios, or you can do so at lightning speed,’’ says Willemsen. ‘‘You must be able to think in terms of scenarios at all times: what could happen, and what would be the impact of that event?’’
Continuous scenario planning
Scenario planning has long been used for strategic issues, such as the design of supply chains. According to Involvation, companies can now also use scenario planning for tactical or even operational issues. ‘‘Take sales & operations planning (S&OP) as an example, which is all about joint decision-making. By discussing different scenarios together, the decision-making process improves. In this way, scenario planning helps to build resilience and better assess risks and opportunities.’’
Many companies already use different scenarios. In addition to the base scenario, they have a high and a low scenario: what if demand turns out to be higher or lower than expected? Willemsen: ‘‘However, many more scenarios are possible. What if demand is higher and supply lower than expected? Then your turnover is at stake. Companies that want to be well prepared will have to run many more scenarios. Because reality is always different from what we expect.’’
Optimisation platform
Companies are aided in this by rapid technological developments, including in the field of AI. They now have access to tools that allow them to continuously create, evaluate and analyse scenarios, at strategic, tactical and operational levels. One such tool is the Optilogic platform, with which Involvation has recently partnered. ‘‘In principle, this is an optimisation platform originally developed for network studies, but it is also suitable for other optimisation challenges. The platform brings data and algorithms together and presents the results in an engaging way,’’ explains Menno Rustenburg, principal consultant at Involvation.
The platform has three building blocks. The middle block consists of optimisation algorithms. These are not new, but are now in the cloud. This gives users sufficient computing power to run hundreds of scenarios simultaneously. ‘‘What makes this platform attractive are the building blocks on the input and output sides,’’ says Rustenburg. ‘‘On the input side, it is possible to convert data from various data sources into usable information. Once that is set up, you can update and convert that data time and time again. This means every model can be quickly updated and reused.’’
No whizz kid needed
With Optilogic, it is possible to build multiple models, depending on the problem that needs solving. ‘‘You need a different model for stock optimisation than for transport route optimisation. But because you use the same data sources for all these models, the results are consistent with one another,’’ explains Rustenburg. ‘‘The platform also uses AI to evaluate hundreds or perhaps even thousands of scenarios. This not only quickly generates a set of recommendations, but also suggests new scenarios that provide even better insights.’’
Rustenburg demonstrates how easy it is to create and run new scenarios. ‘‘You don’t need a whizz kid for that. Just type in which scenario you want to investigate. You then receive feedback in the form of an overview of all options, including the data required for them. Under the bonnet, it is an AI agent that creates and runs the scenario. This in turn generates new recommendations and suggestions, creating an iterative process.’’
Blurring lines
Willemsen concludes by noting that the dividing line between software for supply chain planning and supply chain network design is blurring. ‘‘Look also at the visualisation capabilities available today. It is possible to provide tailored insights, both to the commercial director and to the planner. That helps you to better understand what is going on,’’ says the partner at Involvation. ‘‘Modern tools enable continuous scenario planning. Those who make use of them can truly create resilience.’’
Text by Marcel te Lindert
