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Digital Twins and S&OP: Fast Risk Assessment and Decision-Making
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Digital Twins and S&OP: Fast Risk Assessment and Decision-Making

This article is the last part of our three-part series on how S&OP leaders can empower their processes with Simulation Digital Twins. Here we explore the benefits of simulating “what-if” scenarios for fast risk assessment and better decision-making. If you missed our Series Introduction post, make sure to check it out.

A growing challenge faced today by sales and operations planning (S&OP) leaders is how to take into account the inherent uncertainties of their supply chain and customer demand when making decisions. The challenge is often difficult due to the multitude of uncertainties (supplier delays, machinery breakdowns, absenteeism, high volatility of demand, and more) and the difficulty of modeling them well.

A straightforward approach is to take shortcuts to simplify the process, but this is where the problem lies for S&OP managers—the only way to get to a viable plan is to examine and model the granular details.
Furthermore, the S&OP process is a recurring, monthly process that must be done efficiently within a strict time constraint.

Due to this, it is difficult to reconcile the necessary complexity in integrating uncertainties, the depth and quality of scenario analyses needed and the required rapid and straightforward decision-making.

A case in point is an S&OP manager who produces three scenarios based on three different sales plans: an optimistic plan, a pessimistic plan, and an intermediate plan. The S&OP committee validates the scenario that is based on the intermediate sales plan.

However, the real demand is a mixture of the three sales plans by product families. As a result, the plant is not adequately organized to handle the product volumes. On the other hand, it would have been possible to adjust resources and teams if correctly anticipated.

To overcome this, it requires an S&OP solution that can simulate sufficient richness of risks to have a viable confidence index while ensuring that S&OP teams have evaluated the most probable risk combinations—all of this efficiently and quickly to not get lost in the analysis or postpone decisions.

The Role of Simulation Digital Twins in Risk Assessment and Decision-Making

There are several ways Simulation Digital Twins can be used to ensure that the right level of risk assessment is taken into account in the S&OP process and thus lead to better and faster decisions.

Using Simulation Digital Twins, S&OP leaders can:

  • Take into account uncertainties at the right level of granularity to ensure an accurate probability of risks.
  • Integrate a stochastic process of risk identification during the simulation process to adjust the distribution laws and their parameters as close as possible to real uncertainties.
  • Have a confidence index for each scenario’s leading indicators
    based on a sufficiently representative number of simulations (using automated approaches such as sensitivity analysis or parameter exploration).
  • Simplify decision-making by clearly prioritizing key indicators such as profit, revenue, cash flow, service level rate, total costs, CO2 emissions, and others.
  • Ensure structured and traceable management of the tested scenarios.
  • Benefit from the computing power of automated parameter-based analysis or automated multi-objective trade-off search for quick decisions in complex situations with multiple interdependencies and combinations. And enabling tens of thousands of scenarios to be tested automatically as compared to current tools offered.

 

Digital twin technology optimizes the S&OP process by simulating an unlimited number of “what-if” scenarios to highlight risks and opportunities. Thus, it provides S&OP leaders with the tools they need to understand the impact of potential decisions and to optimize their decisions.

The forward-looking, future identification of risk capabilities provided by next- generation Simulation Digital Twins gives organizations the ability to anticipate and mitigate risks instead of manage crises.

To learn more about how your S&OP organization can leverage Simulation Digital Twins, watch a replay of our webinar with Agilea Overcoming uncertainties with prescriptive S&OP. Philippe Bornert, CEO at Agilea, and Romain Ropitault, Senior Product Manager at Cosmo Tech, discuss how organizations can deploy a mature S&OP process to improve responsiveness and mitigate risks.