Supporting Supply Chain Resiliency Through Continuous Design
While supply chain leaders have often prioritized factors such as visibility, cost, and speed, growing disruption in the past decade has led many to take a closer look at resiliency.
Coupa recently hosted a webinar with Forrester about how continuous design can enhance supply chain resiliency. As conditions continue to change, the ability to evolve operational and business models through continuous design will help organizations overcome the challenges of supply chain disruption.
A growing focus on resilience
In recent years, the imperative for supply chain resilience has taken center stage at many organizations, said George Lawrie, Vice President, and Principal Analyst at Forrester. From trade wars and tariffs to natural disasters and the recent pandemic, growing uncertainty has led many decision-makers to put a greater focus on risk reduction.
In the face of the pandemic, many Forrester clients had alternative suppliers, materials, or routings, but lacked the ability to redesign systems to take advantage of them. For many, the most significant barrier was that their supply chain design was fixed based on an expectation of a similar level of demand and could not respond to the disruption. “[A fixed network] gives you the lowest cost of distributing items, but what it doesn’t do, necessarily, is help you to manage uncertainty,” Lawrie said.
While many organizations have flexibility built into supply chains to adjust to common forecast areas or other outliers, other parameters can change at a rapid pace, Lawrie said. Global supply, e-commerce, and quick fulfillment have made supply chains more susceptible to shock and disruption. Shortages of products like toilet paper, food items, and electronics in 2020 demonstrated that supply chain leaders could no longer rely on basic KPIs and data from traditional systems. “It changes the whole picture,” Lawrie said. “Sometimes, they’re missing an opportunity because they are not thinking about the continuous design that drives for leading companies’ strategic benefit.”
The ability to adapt
Many companies are now tracking their supply chain effectiveness and adaptability compared to their peers, Lawrie said. They accomplish this by implementing continuous design that enables them to adapt and balance "just-in-time” and “just-in-case” principles. By harnessing the capability to continuously redesign their supply chain and balance these concepts, they can maintain an economical supply chain that also guarantees resilience and availability to customers.
Lawrie said there are five steps to resilience and things people are doing to protect their supply chain:
- Design supply networks that are both efficient and resilient
- Assemble and employ a cross-functional supply chain risk team
- Simplify the supply chain
- Implement the right technology stack
- Build the right protection for each bottleneck
One of the main ways to attain greater resilience is to move beyond episodic planning from static networks, said Dr. Madhav Durbha, Vice President of Supply Chain at Coupa. Annual or bi-annual planning changes can no longer work in a frequently-changing environment where supply chain leaders have to more regularly make complex decisions. Where to open new facilities, the cost to serve customers, and optimal stocking locations by customer segments will need to be revisited more frequently than in the past.
Organizations now need a design process that allows for end-to-end tradeoffs in a connected manner while offering visibility across the sources, manufacturing, and distribution. “Being able to connect these dots and be able to drive those tradeoffs. And also making supply chain policies that guide planning and execution far more dynamic are must haves,” Durbha said.
Designing with a digital twin
Durbha proposes a sandbox environment where supply chain leaders can simulate a range of possibilities that address risk and resiliency within design processes to make the best planning decisions. The digital supply chain twin is a primary component of this continuous design process. It serves as a replica of the physical supply chain with all the nodes and flows, offering the ability to do scenario planning and thus simulate decision outcomes in the digital environment.
"You can come up with predictions and models of the future and test out various policies,” Durbha said. “It offers the ability to render your entire supply chain with all of its complex interlinkages in a digital environment.”
Fortunately, supply chain leaders don’t need to rip and replace their capabilities to support such continuous design. As it simply informs decision-makers with better policies based on supply chain analytics, they can often get more out of investments in planning and execution systems by prioritizing the capabilities that align with their business model.
For example, a retailer may use a digital twin in supply chain planning to see what their micro fulfillment network should look like based on the location of their customers and expected delivery time. A company may also determine if they would have the ability to support a change in replenishment frequencies to downstream locations from four to five days per week.
“Embracing the principles of continuous design, you can test out different possibilities within the easy-to-train model," Durbha said. "You can handle a lot of these complex questions that require end-to-end tradeoffs, in a very connected, frequent, and repetitive manner.