In a Gartner report published in 2021, the research firm surveyed supply chain leaders to understand why some companies’ global supply chains fared better than others when faced with high-impact events. The study looked at what made some supply chains more resilient than others, or as referenced in the report, more fit than fragile. It’s not surprising that respondents cited the ongoing pandemic as the most impactful event in recent years.
What was surprising is that it’s not the type of disruption that determines the supply chain impact but the other way around. The type of supply chain determines which disruptions will be the most impactful.(1)
The researchers found that survival and prosperity happened when supply chain leaders were able to turn a crisis into an opportunity. “Successful manufacturers saw the crisis as an opportunity to strengthen their supply chains and build in resilience,” said Hugues de Bantel, CEO of Cosmo Tech.
This is increasingly critical as the frequency and acceleration of disruptions are expected to increase in the new normal. “In 2022 and beyond, we’ll see supply chain volatility as a major issue companies face. Climate change, global trade shifts, and supplier disruptions, among others, will continue to stress supply chains,” said de Bantel.
Companies must proactively redesign and rebuild their supply chains to withstand future disruptions. Key learnings from the past two years are invaluable as forward-leaning companies turn crises into opportunities by implementing next-gen technologies and solutions.
Companies that had pre-pandemic relied on traditional supply chain planning software migrated to enhanced technologies for better end-to-end visibility. These companies not only made swift changes, they understood that investment in their supply chain would be a decisive factor in how well they turned high-impact disruptions into opportunities. “For the companies that migrated, they saw how real-time visibility of their entire supply chain was a game-changer,” continued de Bantel.
Building a digital replica of their supply chain, these companies were able to mirror assets, transactions, suppliers, and logistics. By modeling the entire supply chain, they created potential scenarios showing how shifts in supply impact costs and customer satisfaction. Or how increasing inventory could reduce profitability in the long term.
“Creating a digital twin of their supply chain, companies run dynamic simulations to understand the impact of different potential scenarios to make better decisions,” said de Bantel.
Michelin, a global tire and mobility products manufacturer, turned to Cosmo Tech Prescriptive Simulation Twins to optimize its complex global sourcing.
“The number of product models we need to manufacture to serve each market is increasingly complex. There is a lot at stake in finding the right balance between locally manufacturing versus exporting,” explained Thibaut d’Hérouville, VP Group Industrial Supply Chain at Michelin.
Using Cosmo Tech’s AI-Simulation Technology, Michelin determined the best strategic sourcing plan for the next five years to reduce their logistic costs by €10 million annually.
“During the past couple of decades, end-to-end supply chain visibility is even more difficult due to suppliers’ deep tiering that leads to complex interdependencies, reliance on trans-global logistics in sequential production, and increased high-impact disruptions,” said de Bantel.
Building resilience into the supply chain requires the ability to minimize and recover from a disruption. The Gartner study shows that resilient supply chains focused on the long-term and avoided short-term expediency. Creating supply chain resilience requires investing in both resistance to risk and recovery from uncertainty.
Improving overall supply chain resilience by concurrently focusing on resistance and recovery offers supply chain leaders the opportunity to respond to predictable downtime of a delayed delivery to the unpredictable impacts of a global health crisis, for example.
Prescriptive Simulation Twins let organizations stress-test plans for robustness to uncertainty, demand variability, lead time, and supplier stock levels. By creating a virtual replica of the entire system, supply chain leaders can test assumptions against response scenarios to find the optimal course of action. These scenarios are shared with suppliers to ensure alignment.
The metaverse is opening up new possibilities in how organizations can model and leverage real-time data to optimize their supply chains. Microsoft has even gone so far as to cite simulation as the killer app of the metaverse. In this alternative digital reality model that mirrors the physical environment, digital twins play an increasingly important role. With the real-time data of Internet of Things (IoT) devices fed continually into these virtual or metaverse models, decision-makers can understand the current state of their supply chains and with greater accuracy than ever before.
By running simulations in real-time to the virtual model, decision-makers can test “what if” scenarios to better understand the impact of a potential disruption on their supply chain. This brings a whole new dimension to being resilient to sudden shifts in supply or demand or other disruptions that could potentially throw a company into a crisis.
Prescriptive Simulation Twins are a critical piece of the puzzle in how well companies navigate current and future disruptions. Supply chains face more challenges ahead and must be built on the premise that disruptions are opportunities for change and, if done right, a competitive advantage.