Real-Time Digital Supply Chain Planning Strengthens Business Resilience, Reduces Operational Risk

Operational Risk and Business Resilience?

Companies, and whole industries, are continuing to experience operational risk and disruption on a global scale.?According to BCG,?business resilience is the capacity to absorb stress, recover critical functionality, and thrive in altered circumstances, and it is a key indicator of a company's overall health.

Despite overstocking of inventory and massive bullwhip effects experienced by many companies that did not have effective supply chain planning processes or digital capabilities in the last two years, operational risks can still occur, and resilience is more important than ever.?

Operational risks may include product recalls, or supply disruptions, and can affect a company’s reputation for many years. Depending on the event and the publicity,?McKinsey highlights resulting equity losses are on average five times greater than direct financial losses.??

Indeed, cited in the recent research, according to the ORX global banking database, more than 65,000 loss events on average occurred from 2016 to 2021,?with losses totaling close to $600 billion over the six-year period.??The 2023 ORX research will no doubt also show extensive impact of the tragic events of the last year on companies' supply chains.?

The Federal Bank of New York’s?Global Supply Chain Pressure Index (GSCPI)?shows the disruption stabilizing in the last six months.?So how can companies use this time to properly prepare for business resilience, and diversify their supply chain risk with digital capabilities?

Supply Chain Planning Critical to Resilience

Companies are focusing on?Martin Christopher’s 4Rs?of resilience, reliability, responsiveness and relationships to deliver supply chain competitiveness in this era of heightened disruption. Supply chain design and operations need to be efficient as before, but now also focused on strategic inventory and spare capacity in the firm’s network.?

Scenario planning is critical to evaluating the different demand and supply possibilities and solving these to?build resilient plans for your business and suppliers. Assessing manufacturing capacity, availability of inventory, and transportation times holistically can be a game-changer for customers, distributors, and meeting demand of end consumers.?

Holistic scenario planning helps to rapidly identify capacity challenges in specific regions with tier one suppliers, highlighting the need to collaborating with tier two and three suppliers. These options and probabilities having clear financialized scenarios integrated with real-time costs enable swift and accurate decision-making.

The speed of deploying and integrating these planning capabilities are critical. Many companies have discussed scenario planning in siloes for many years. Not enough businesses have acted on creating the right value chain planning processes to dynamically connect business segments, let alone demand, supply, and inventory planning teams.?

Many companies are still choosing to use Excel or build a planning process and platform that is not easily connected or extensible to include diverse data sources that can enhance the accuracy of scenario planning.?

Deploying out-of-the-box standardized planning capabilities at pace that can connect not across the value chain, but also to external suppliers, is a resilient path that reduces process variability, leading to speed of adoption and executive reliability of decision-making.??

Examples of Resilient, Reliable Scenario Planning with SAP IBP

SAP Integrated Business Planning (IBP)?has helped over a thousand customers across many industries drive resilient scenario planning at scale over the last few years of disruption. One of the key challenges for customers was the reliability of transportation companies due to multiple disruptions of ports, logistics networks and COVID-19 restrictions.?

Westernacher Consulting?have supported many SAP IBP customers with rapid deployment of best practice processes and scenario planning on the platform across multiple regions and industries.?

Using the accelerated integration and extensibility of SAP IBP, Westernacher have connected logistics visibility and transportation planning directly into the scenario planning process to enable resilience for their customers.?

Simulating delays in real-time with custom alerts in SAP IBP using purchase order (PO), advanced shipping notices (ASNs) and container details with SAP ERP and Transportation Management (TM) and events from the visibility platform Project44, Westernacher also help customers holistically manage the value chain execution process by exception.?

Benefits they have identified with customers are supply chain visibility, faster disruption identification and resolution, enhanced impact analysis, and the ability to conduct personalized analysis and AI-enhanced what-if scenarios.?

Using these integrated planning capabilities, organizations can optimize their supply chain operations, minimize disruptions, improve responsiveness, and ultimately deliver better customer satisfaction through timely delivery and product availability.

With this integrated capability, organizations can now use historical transport data to fine-tune their forecasting and capacity planning. This enables comprehensive simulations, facilitating a seamless transition into the logistics request for quotation (RFQ) phase from SAP IBP to TM, so companies can de-risk their transportation planning and reliability.

Connecting insights directly into action to adjust plans to source from alternative suppliers, plants or deliver via alternative logistics partners gives customers new resilience to cope with disruption and maintain reliability for end consumers.??????

Westernacher are using their expertise in transportation management and logistics and the extensibility of SAP IBP for external data sources to innovate with leading customers on calculating CO2 at the transport order, simulating various transportation modes to meet service level agreements at the lowest carbon impact.

Using transportation load building scenarios in SAP IBP order-based planning, customers can simulate multiple transportation plans depending on carrier capacity and constraints, dynamically reconfiguring loads with agility and speed to successfully meet customer demand.?

Conclusion

SAP IBP is supporting customers with scenario planning using real-time data on PO and freight units to dynamically meet demand and supply challenges caused by disruptions. These financialized planning enable reliable decisions considering risks and impacts across the value chain and external events with supplier constraints to meet customer demand sooner with higher profit and lower impact on the environment.??

Overall, SAP IBP is supporting our customers’ business resilience, identifying potential operational risks earlier, and developing digitalized new business models and supply chain relationships to deliver on the perfect order and the customer promise.?Read more about how SAP IBP is supporting our customers’ resilience here.