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Optimizing Supply Chain strategies and network designs keeps getting harder. This is where the Supply Chain digital twin comes in handy. The luxury of time has disappeared. Supply Chains must be capable of turning on a dime to match changing customer preferences and needs, disruptive competitors and economic fluctuations. In other words: Supply Chain professionals are forced to manage complex multi-network operations in a state of constant flux. In this blogpost we will describe what a digital twin is and how you can benefit from having one.

Ad-hoc tools are typically not sufficient
While most global Supply Chain reliant companies have already embraced the power of data and advanced analytics across their organizations, the vast majority have been working with out-of the box tools, cobbled together in-house applications or spreadsheetbased solutions. These approaches are often inadequate for Supply Chain managers who need to handle real-time data and complex business requirements across multiple networks or systems – all while balancing risks and trade-offs.

What if you could instead empower your team of analysts with a fully living and breathing digital representation of your Supply Chain. A so-called digital twin, which can easily be understood and utilized for any number of functional and technological advances.

A Supply Chain digital twin – a virtual representation
Gartner refers to the Supply Chain digital twin as:” A digital, dynamic, real-time and time-phased representation of the various associations between the data objects that ultimately make up how the physical Supply Chain operates.”

A Supply Chain digital twin is a virtual representation of real-world operations. Investments made in creating and building digital twins will pay off again and again. The live data being captured can be used in everything from quality control to inventory management. Supply Chain digital twins are also valuable because they can be analyzed and explored by various stakeholders using different types of tools. They can be used by engineering, production, and maintenance teams to experiment with new approaches and what-if-scenarios without disrupting actual production.

The data captured by Supply Chain digital twins is available to feed Machine Learning predictive models. In general, the larger and more varied the dataset being analyzed, the greater the likelihood machine learners will discover previously unknown operational patterns and aberrations. However, for machine learners to be effective, they need to be analyzing relevant data. Modern streaming architectures can dynamically filter incoming data to focus on the right data points and levels of granularity. Data from Supply Chain digital twins can also be automatically input into decision models, which capture the range of operational choices that could be made at key control and intersection points within the business. Optimizations can then be run to mathematically identify the best sets of choices – among thousands of possible decision combinations for achieving specific goals within specific operating constraints.

Easily create and test scenarios
Given that Supply Chains need to be redesigned to treat disruptions as the norm and Supply Chain Resilience, we believe that the use of Supply Chain digital twins will increase. Supply Chains can use them to create business process simulations that can be updated in real-time as circumstances change. For example, this could include finding the best way to shift production to alternate locations, move inventory to different warehouses, increase or decrease safety stocks and be better prepared overall.

Summing up, we could say that a Supply Chain digital twin allows companies to recreate their Supply Chain in the virtual world and quickly test scenarios in a risk-free manner to learn how decisions will impact the network operations. As digital twinning becomes increasingly commonplace, optimization will be widely adopted as one of the biggest prerequisites. Data availability and readiness will already be taken care of. In addition, better tools for digital twin visualization will help teams explore and understand the key drivers and trade-offs in optimized plans and decisions.

Looking for more resources on the Supply Chain digital twin?

Checkout this whitepaper – free to download.

Optilon’s Fredrik Jersby did in this webinar give a detailed description of a digital twin. Check it out here.

Our client SKF has worked with and won a gartner award for their work on the digital twin. Check out the webinar here.
You can also read about their results right here.

We had the pleasure of having Joachim Lindquist from Arla Foods join one of our webinars on Supply Chain resilience and digital twin.
Check it out here.

Welcome to a Recap of The Optilon Supply Chain conference 2021, that was held on September 15th 2021.

The overall theme for this conference was: Thriving in uncertainty. Preparing for the future.

Why is this topic interesting?
Supply Chains are typically designed for efficiency, cost, and proximity to markets, but not necessarily for transparency and resilience. Now they are operating in a world where disruptions are regular occurrences. Both business-to-consumer (B2C) and business-to-business (B2B) companies expect to see meaningful shifts in future demand. This will affect commercial models. Thriving in uncertainty and preparing for the future means building resiliency by improving the Supply Chain and transparency, minimizing exposure to shocks, and building the capacity to respond.

Below you will find an outline of the speakers of this conference:

Block 1:

Speaker Matt Britton on the topic of: Understanding the conscious consumers of tomorrow.
Matt is a true leader when it comes to connecting the dots between the brands of today and the consumers of tomorrow. Matt has inspired and educated the world’s leading brands, on the state of the new consumer and its effect on business models and consumer trends. Listen to this energetic talk and learn how your brand and business will be affected by the conscious consumer.

Speaker Thomas Bjørnsten on Improving business intelligence with human data.
One way of working with resiliency is to work with end-to-end transparency and demand shifts. Thomas Bjørnsten, Phd. works with human data at Innovation Lab. In his speeech he provides insights into facts and fantasies when it comes to the human factor in a data-driven business. He teaches about emotion computing and how feelings can become big (data) business. He also shares how the interactions will be between humans and machines and discuss the role of trust in adoption.

Speaker: Marketing Associate at Optilon John Wikström on the topic: The unredeemed Supply Chain potential in the Nordics.
Nordic companies have a potential to redeem a significant potential when it comes to unnecessary inventory, tied up working capital and unnecessary square meters used for storage and distribution. Speaker: John introduces us to the report, which this year covered all the Nordic countries, named The unnecessary report 2021. John shares the possible actions that can be taken to redeem the potential.

Watch the recording from block 1

Block 2:

Panel discussion on how you can realize the full potential of Supply Chain sustainability
In the panel we had Thought Leader and strategic advisor Alis Sindbjerg Hinrichsen from Optilon, Karl Orrling from Alfa Laval and Eva Grønbjerg Christensen from Sustainify.

Speaker: Manuel Maihofer on the topic of: Improve your end-to-end planning with a digital twin
Companies that utilize the digital capabilities of Supply Chain planning will be much more resilient and better equipped to handle challenges, as well as competing more effectively. What does that mean in practical terms? Manuel Maihofer, Business Analyst and Project Manager from SKF focuses on how a digital twin could be an enabler. Manuel Maihofer is convinced, that transparency, business intelligence and digitalization of processes are key facilitators to improve supply chains. Manuel manages agile IT development projects, establishes workflows and turns data into insights, from purchasing to customer service and from production planner to top management. He plays an important role in creating SKF’s digital twin, which fuels initiatives like Integrated Planning, Demand Management and S&OP.

Watch the recording from block 2

Block 3:

Speaker: Andreas Wieland on the topic of: Transformative Supply Chain Management
Andreas Wieland is an Associate Professor of Supply Chain Management at Copenhagen Business School. He is the Program Director of CBS’s Graduate Diploma (HD) in Supply Chain Management. His current research reinterprets global Supply Chains as social–ecological systems. Global supply chains can be quite complex. Many managers have understood this. But maybe supply chains are even more fundamentally different from what we often imagine? In his talk, Andreas Wieland challenges the conventional assumptions we have about supply chains and supply chain management. He provides transformative solutions to futureproof supply chains in an era of crises.

Speaker: Andrew Spence on the topic of: Transforming the world of work with technology
Andrew talked about how organizations will be able to find the talent they need – when they need it – from a liquid workforce. Hence, they will require fewer full-time employees, and we will see the demise of the traditional job. The focus will be leading work, not employees. What does this mean in the short and long term?

watch the recording from block 3

Transform with a resilient Supply Chain. Persistent challenges from increasing customer demands, disruptive competitors, and economic fluctuations make the optimization of Supply Chain Designs harder.

Various megatrends mean that Supply Chain complexity and risk are growing. Decision making speed and quality need to increase to enable faster recovery from disruptions. At the same time, there is a need to handle real-time data and complex business requirements across multiple networks – and balance risks and trade-offs.

While many risks to the Supply Chain come from the external environment, such as war, pandemics, and earthquakes, there is growing evidence that the Supply Chain structure is itself the source of significant risk.

The ideals of a fully integrated, efficient, and effective Supply Chain
The challenge of the Supply or Operations manager is to achieve the ideals of fully integrated, efficient, and effective Supply Chains capable of creating and sustaining competitive advantages. They must balance downward cost pressures and the need for efficiency with effective ways to manage the demands of market-driven service requirements. At the same time, they need to ensure a resilient and transparent Supply Chain.

By democratizing the processes and thereby reducing functional and data silos, creating an environment for constant learning, using a Supply Chain digital twin to visualize the current Supply Chain and advanced algorithms to model the future, there is an opportunity for ambitious companies to move from episodic one-off design reviews to a state of continuous design. To many, that means transforming from a manual approach to a digital one.

In this whitepaper, you can learn more about what Supply Chain design and resiliency are. Reading this whitepaper will provide you with insights on how you can transform with a resilient Supply Chain by utilizing Supply Chain Design while ensuring that it provides you with a competitive advantage.

Download whitepaper now

Building a digitally enabled Supply Chain, where the customer is in focus, is for many companies a challenge. The business case for doing so has proven to be worth the challenge though.

According to a survey, which the Digital Supply Chain Institute (DSCI) did, the design of and transformation to a digital Supply Chain with the customer in mind, can reduce procurement costs for all purchases of goods and services by 20% and reduce supply chain process costs by 50%. In addition to decreased costs, the transformation to a digital Supply Chain can increase revenue 10% by creating a better customer experience and new routes to market.

In this blogpost we will provide you with some inspiration on how you can design and transform to a digital Supply Chain with the customer in mind and the role of the Supply Chain manager in doing so.

What does Supply Chain digitalization mean?
Before we dive into the how, let’s have a look at what transforming to a digital Supply Chain means. Real digital transformation is not about getting your company to use a specific set of new technologies. It is about your company’s ability to react and successfully utilize new technologies and processes. In a Supply Chain context, the approach to digitalization could happen at three different levels.

The first level is strategic focusing on having a strategic approach to digitalization as part of the Supply Chain strategy. This level is at the overall business level and is concerned with how digital strategies can improve existing business models or develop new business models.

The second level is about business processes to identify, which processes are influenced the most by digitalization and what projects are needed to be implemented. Business processes and technologies must go hand in hand.

The third level is the enabling level, focusing on the concrete technologies and systems to be implemented in supporting the requirements of business process outcomes.

The human factor is of course of vital importance and is too big a subject to cover here.

Regardless of the size of your company or the sector it is involved in, real digital transformation includes using new devices, platforms, systems, and networks to create:

More profitable business models
More efficient operating processes
Greater access to markets
Enhanced offerings to users
New sources of revenue

The challenges
Transformation in any part of a business has always been difficult. It requires organizations to juggle multiple moving parts, including people, processes, and organizational infrastructure. And it requires them to overcome all the usual technical, organizational, and cultural obstacles to change.

Digitally-enabled transformations add two extra challenges into the mix. First, there is the extra technology component, which must be handled alongside changes to processes, organizational infrastructure, and mind-sets and behaviors. The second, and more significant, challenge for companies, introducing digital technologies, into their supply chains today is the lack of a single, clear destination.

Digital technologies are evolving so rapidly, that there hasn’t been time for many of them to prove themselves at scale. Supply Chains are so specific to each company’s product range, operating footprint, and customer needs that there is no archetype.

All that extra complexity and uncertainty means, that companies can no longer follow the traditional linear transformation path: they need an iterative approach. New digital technologies must integrate with people, processes, and organizational infrastructure—but those technologies will also influence how each of the other elements should be redesigned.

It is all about market responsiveness
Most Supply Chain executives used to be expected to deal with working capital, operating costs, and customer service. In many companies Supply Chain worked in the background, trying to keep operations smooth and all the stakeholders happy.

Supply Chains are still the central nervous system of the economy, and it is supporting the advanced lifestyle that we enjoy. We see the Supply Chain in action, so to say, each and every day, as we see transportation on our roads, rail, sea and in the air. Most consumers do not even realize to what extent they depend on Supply Chains in sustaining their everyday way of life.

Also, as more and more sales happen through digital channels, the Supply Chain is now a key player in the definition of the go-to-market model. Customers going online have become increasingly demanding and the operating environment has become more complex.

The continued, and quick, growth of e-commerce are giving air to the idea, that consumers can interact with retailers and brands through multiple devices, order products through these devices, choose from multiple delivery options and expect a seamless experience throughout is now coming to the fore even more rapidly.

This also means, that the traditional “inside out” approach does not work any more and many companies are on the road to transform themselves, so they become more agile and market responsive. In doing so digitalization plays a key role.

Supply Chain Managers must become more business facing
With the above in mind, Supply Chain professionals must take on more business-facing activities, particularly in the areas of planning and customer relations. Also, companies have begun thinking about end-to-end planning, become serious about demand planning, and aligning different actors in the company such as sales and finance.

From a Supply Chain digitalization perspective this is putting pressure on traditional Supply Chains to improve their master data management, develop new data models and manage a magnitude of orders and product availability complexities.

Supply Chain Managers should look for enabling technologies
Hearing and thinking about Supply Chain digitalization also means hearing about many technologies and buzzwords, and unfortunately very few cases and concrete examples. It can be challenging to find out where to start. For Supply Chain managers balancing the “day to day” imperatives of service, cost and working capital management, as well as navigating internal stakeholders, it can be difficult to know how to approach the topic.

The Supply Chain manager can look at the Gartner Supply Chain Strategy Hype cycle, which represents the maturity, adoption, and social application of specific technologies. Though, when reviewing those it is equally important to separate the hype from reality and identify those that have a best fit for the organization. This could mean engaging critically with new revolutions, benchmarking against others, understanding the right fit and developing the internal business case.

Supply Chain Managers must look for gamechangers
New technologies is not the only thing that Supply Chain managers should look for. Running a competitive Supply Chain in a volatile world demands a constant outlook for gamechangers. The impact of political instability around the world is impeding the efforts of global companies to efficiently drive cross border trade. It will also disrupt global sourcing strategies designed to make in-bound Supply Chains leaner through accessibility to a greater diversity of sources.

Adding to that, we have the “Uberization” and the climate change which challenges the designs of the Supply Chain. With Uberization we mean asset sharing, pushing utilization rates up and accompanying transaction down. We are just at the bottom of the learning curve, so there is a long way to go.

In other words, because the likelihood is that centre-of-gravity of a Supply Chain is going to change frequently in the future, given the volatility of the business environment, the need for flexibility in the supply/demand network increases. Resilience comes with a cost so a conscious decision about what level of flexibility the company should provide is key. In other words, all this uncertainty is the enemy of efficient Supply Chains.

The vulnerabilities of the changing Supply Chain were also visible long before the crisis hit. Developments were driven by a need to make the Supply Chain more sustainable, become more digital, adapt to new business models and become more efficient. Simultaneously, the capabilities to respond and adapt to rapid and big changes in volumes and customer behavior. The crisis has just highlighted these vulnerabilities.

Creating an “outside in” approach
The only way you can claim to be truly “people/customer-centric” is to find a way to interpret customers’ expectations, organize these into a small number of groupings or segments, and then directly link these back to the organizations challenges. In other words, mapping the market in this way becomes a frame-of-reference for re-engineering inside the organization.

Designing a supply chain that will function for 5 to 10 years is a big investment. Doing this successfully means understanding the individual values that shape buying behaviors. The first thing to understand is buying behaviors. According to John Gattorna, author of the book: Transforming Supply Chains, you should expect to uncover four or five dominant buying behaviors for any given product/service category in each target market—and that, combined, these will give you about an 80 percent fit to a given market.

Once you’ve done the research to understand the buying behaviors, associated with a particular industry and company and products, it’s a fairly straightforward task to work backward to engineer an equivalent number of suitably structured supply chains. In other words, once you understand the structure of your market, you can replicate that structure inside your business and within the supply chains that are hard-wired into your business.

Buying behaviors will change. The changes, however, tend to involve short-term shifts between the behaviors already identified. This is a process, however, that demands the ability to understand, observe, and connect with customers.

What Gattorna is arguing for is an “outside-in” approach. It’s consistent with the Design Thinking that Roger Martin introduced about 10 years ago— the idea of looking back at your own company through the eyes of your customers, and trying to understand what’s in the customer’s mind.

The digital Supply Chain must be designed
High performance Supply Chain’s do not just evolve over time; they must be consciously designed to fit specific product-market combinations. The design or redesign process must work from “outside in”, supported by design thinking. It is necessary to see the patterns in the market and the demand data and respond with precision.

John Gattorna’s framework Dynamic AlignmentTM is a perfect example of a tool worthwhile looking into. Tailored Supply Chains will help you create the market responsiveness you are looking for, as it provides flexibility. Without flexibility and the right technologies, it is difficult to claim that you have the customer in mind. So first you must understand your business landscape and then you should design the Supply Chain of the future.

As you might recall, according to a survey, which the Digital Supply Chain Institute did, the design of a digital Supply Chain with the customer in mind, can reduce procurement costs for all purchases of goods and services by 20% and reduce supply chain process costs by 50%. In addition to decreased costs, the transformation to a digital Supply Chain can increase revenue 10% by creating a better customer experience and new routes to market.

Summing up we could say that:
1. Look for gamechangers
2. Assess the technologies
3. Segment the customers
4. Understand buying behaviors
5. Build the transformation plan

Speed in decisionmaking is key for you in terms of reaching your sustainable targets. Though, in many companies employees still work in excel sheet’s when it comes to modelling new Supply Chain designs or even measuring the GHG (Green House Gas) emissions throughout the Supply Chain. The challenge is, that making the right decisions is a complex task. For many companies the complexity is growing. If you want to ensure that you make the right decisions at the right time and in the right quality it is essential, that you have the right tools available. In this blogpost we will look at why Supply Chain design technology is key for your Supply Chain sustainability progress. We will also look at why it is a good investment.

Supply Chain Sustainability at a glance
We live in a world where the “new normal” is increased instability, brought about by a multitude of causes. Political uncertainty combined with a leadership vacuum among governments everywhere, technology disrupters, emerging new business models and the shift away from globalization back to economic nationalism. And last, but not least, consumers are demanding that you actively work to build a sustainable business. These factors are contributing to the fragmentation of established Supply Chain networks.

Sustainability has become a critical perspective in managing organizations.The corona virus pandemic has fundamentally shifted the trends in Sustainability and the way companies are doing business and it is a clear signal, that Supply Chains are entering a transformative decade.Even though COVID-19 had a huge impact on Supply Chains and Sustainability practices, only 52% of the companies have a Supply Chain Sustainability goal. There is greater investment in Sustainability and higher sales for products with Sustainability related labels, indicating a shift in customer behavior. Therefore, the pandemic has contributed to the acceleration of Supply Chain Sustainability agendas.

End to end alignment
If we look closer at the Supply Chain, we could say that the end-to-end Supply Chain is a system with three key “subsystems” at play. A customer market, a supplier market, and the organization (ourselves) in the middle. To design more appropriate responses, we need to understand the drivers within each subsystem and how they inter react. With that we mean:

– The behavioral drivers and segments in the customer marketplace
– The behavioral drivers and segments in the supplier marketplace
– Our own in-house network, which is effectively a decoupling zone between Supply and demand

Summarizing we could say that the Supply Chain design should convey the different types of activities needed on the demand side and the capabilities we need to draw upon from the supply side. It proactively enables us to make intentional decisions when designing the network , including how and where to buffer or decouple along the chain/network.

Faster and better decision making
Decision making in operational environments is changing. The quantity and quality of data available to support decision making are growing exponentially. Focus is on exceptions, with more routine tasks automated. But in a more volatile environment, risk is higher and assumptions harder to make. What has not changed, however, is that despite of all the decision support available, the critical strategic decisions will still come down to individuals and leadership teams.

Complexity demands technology for Supply Chain design
That is where Supply Chain technology comes in handy. ERP systems are partially enforcing organizational siloes with limited scenario and analytics capabilities. Also, business intelligence initiatives and data lakes are limiting the insights into the future as it is typically projecting historical or current set ups, lacking alternative solutions never used before. Insight gaps and decision evaluation are based using an excel solution.

As also described earlier, the challenge is, that the pace of internal and external events that impact our supply chains is ever increasing. So is the interdependency of those events and the functions within the supply chain networks. With a complexity well beyond the grasp of excel, there is an immense need to augment and improve to make more sustainable and intentional decisions. That is why technology is needed.

What is Supply Chain design?
Through scenario analysis, with mathematical models built in none-code environments on top of powerful solvers, Supply Chain Designs offers organizations a flexible approach to:

Articulate the complexity and events in the Supply Chain and understand and act upon the principles under which it operates across all its functions (end to end)
Articulate the relevant actions and decisions the organization need to take every day to support the realization of its strategy and vision
Evaluate the consequences and risk associated with those actions and decisions across the entire supply chain
Make decision recommendations given different organizational objectives among the overwhelming amount of solutions that each scenario typically holds

In other words, given strategic objectives on sustainability, operational cost, market growth, or service requirement etc., Supply Chain Design let you resolve infrastructure and policy question such as

optimal number, size, and locations of facilities (suppliers, plants, warehouses )
the best flow and decupling point set up for products in your network
optimal mode of transport (air, ocean, truck, drones etc.) on your lanes
best routing for shipment pickup and delivery
.. and many more

How can it benefit your business and your Supply Chain?
As a result, you will be able improve your balance between costs (logistics, inventory, labour, utilities, taxes), risks (fire, flood, natural disaster, strike, legal, political) and carbon emissions. As well as your service levels (customer satisfaction) and the flexibility of your business. Supply Chain Design initiatives typically produce significant cost savings and service improvements, especially when integrated into the decision making processes.

You will be able to:

Put your supply chain in context with visualizations that highlight trends
Quantify your supply chain health to see performance
Monitor and track supply chain performance with a living baseline for a view of the ecosystem and its policies
Model, track, monitor and share visualizations with stakeholders for more buy-in and bigger thinking

When it comes to speed in decision-making you can use Supply Chain design technology to go from weeks and months to days, hours and for some even minutes in building a model.The below figure illustrates it.

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Every business want’s to gain competitive advantages by putting the conscious consumer in focus in the Supply Chain design. What is a conscious consumer, which competitive advantages could be achieved and how can technology support? Learn more in this blogpost.

What describes a conscious consumer?

Being a conscious consumer in 2020 is linked to the way we live, the choices we make and the meaning we create. What we are looking for is to simplify our options and having smooth purchasing experiences. More specifically we could say, that conscious consumers are becoming wiser. This is forcing companies to constantly innovate, drive prices down and streamline their offerings.

At the same time conscious consumers are becoming more self-sufficient. They make use of apps and personalization services to create a product uniquely to them. Being able to look after yourself is seen as a luxury, that allows people to be more versatile and expand possibilities. Dictating, designing and personalizing your life allows you to be more flexible.

At the same time, conscious consumers demand immediacy, an “I want it now” attitude. Consumers are seeking frictionless experiences that mesh with their lifestyles, allowing them to dedicate more time to their professional or social lives.

Conscious Consumers want a plastic free world. Consumers will use their wallets to protest the irresponsible use of it and create a virtuous circle, where industry stand to gain by improving sustainability. Consumers are rejecting the mass-produced and generic and will favor products positioned as simplified, back to basics and better quality.

The conscious consumer’s impact on the future Supply Chain
The Conscious Consumer increasingly drives innovation from the heart of the supply network, rather than being on the receiving end of the supply chain. This means, that we are shifting towards consumer-led, data driven, highly complex supply networks.

These shifts demand mass product customization, more accurate supply chain planning and synchronization, and faster multichannel responsiveness that go far beyond the abilities of the typical workforce and infrastructure. It requires instant visibility, quick decision making and increased flexibility across the whole network.

Digitalization is an enabler
Digitalization can be an enabler for both enhanced visibility and transparency, cost reduction, enhanced customer focus and service. As well as the foundation for a more agile and dynamic operating model and performance improvements in the full value chain. In building the vision, where should a company start?

You could be inspired by a recent study which PA Consulting Group has conducted:

74% say it is driven by the search for new ways to reduce costs
59% want to advance their technologies, such as automation
56% are seeing changes in consumer or customer behavior. They want sustainable products supplied with immediacy and personalization
51% say it is due to new business models. Integrated Supply Chain systems are becoming the foundation for the new business models to function
41% do it because of the fear of being left behind.

Digitization should bring value
According to the recent study done by PA Consulting Group, 30% of those who responded could not say what value digitalization would bring. 79% said, that they do not have the right mix of skills and capabilities. Half of the respondents said, that they have no clear vision for their digital Supply Chain.

This would mean that they have no way to align Supply Chain initiatives with the business strategic objectives, no formula to establish appropriate budgets for investments and no framework for establishing a dialogue around, how the future would look like.

How can digitization bring benefits to the company?
There are several ways in which digitization could bring benefits to the company:

Visibility and transparency
In order to respond to the different disruptions in the market and act with agility, resilience and predictability it is important to reduce the operational silos and mitigate risks. Data from digital systems reduces errors by removing data collection and manual reporting processes. It creates a stronger foundation for taking the right decisions. At the same time, it increases collaboration and agility and reduces response time to a few hours.
Better customer service
It is important to build a Supply Chain based on data, which helps you understand how customers buy and use their products and services. Understanding the customer could also mean opening up for new revenue streams, as well as responding to the immediacy and personalization which the customers are expecting nowadays. It would mean better delivery performance, customer focus and service.
Cost improvements
As soon as you start improving on visibility you start building the baseline for reductions in inventory and improving the balance between supply and demand in the whole value chain. Money and time which can be freed up for growth in other areas of the business.
Streamlining operations for better performance
AI and machine learning can help improve operations for better performance. It is about creating insights for improvements that are hard to do without. Read more about AI in supply chain here.

Create a knowledge funnel
As a leader you have to accept, that the shaping of a vision is an ongoing process of discovery, disruption, experimentation and learning. It is situational. It is not a fixed object it is invention in motion. As a leader you have to shape the vision, but you have to seek the broad involvement of a broad set of suppliers, employees, conscious consumers and other partners -which could provide an idea about how the future might look like. Even more, you uncover and partner with industry provocateurs and pioneers who anticipate what is next.

This will also help segment the complexities that exist within the Supply Chain and the marketplace you are operating in. It will help you understand the different consumers that exists within your Supply Chain and describe the patterns around them.

Organize the chaos
You can use the following framework to organize the chaos in the marketplace and describe the patterns of your consumers. For each category you can ask the following questions:

1. How will the trends within this industry affect our company and Supply Chain?
2. What opportunities and threats will these trends imply?
3. What actions could we take to anticipate and respond to these trends?
4. What characterizes our consumers?

Supporting categories:

Social: Changing lifestyles, social trends (urbanization, flexibility of where work is done, work-life balance, social mobility, globalization)
Technical: Increasing digitalization, the use of technology for efficiency, innovation, information and connection.
Economic: Global markets with new competitors, economic cycles, new business models.
Political: Political unrest, regulatory policies and shifts, increased nationalism or populism, global trade
Environmental: social responsibility, community reputation, effects of climate change, sustainability
Demographic: changing workforces, influence of millennials, unconscious biases and cognitive styles, aging employees

Design and visualize the future
Once you have organized your chaos it is time to design the future. Here it is important to visualize the interaction between the customer needs, the formulation of appropriate strategic responses and the successful execution of these strategies by shaping the necessary internal capabilities and corresponding leadership styles.

Use simulation and modelling Supply Chain technology to find opportunities. You should utilize data gathered from multiple sources, creating an authentic digital twin of your complete Supply Chain to visualize current and future Supply Chain models and find new opportunities.

Sources: Power Your Potential, The value of the smart Supply Chain

The ongoing COVID-19 pandemic is a reminder of the importance of Supply Chain Resilience. The challenges associated with the current disruption is showing us new consumer behavior with unprecedented variation in order volumes. To handle the demand variation, you need to adopt an operating model that accommodates the extreme level of uncertainty facing your business.

Reactive capability
The concept of Supply Chain Resilience traces its roots back to the work of C.S. Holling, an ecologist who first noted the characteristics of a resilient ecological system in 1973. Since then, the notion of resilience has been applied to fields as diverse as psychology, systems thinking, disaster management, and more recently, supply chain management. For some, resilience is a reactive capability that occurs after a disruption or shock has taken place. Others see resilience as more proactive efforts toward helping the firm prepare for a disruption. In light of these divergent observations, it is not surprising that there is confusion surrounding this key concept.

Supply Chain Resilience is: “the ability of a supply chain to both resist disruptions and recover operational capability after disruptions occur”. As mentioned above, viewed from this perspective, resilience consists of two critical but complementary system components: the capacity for resistance and the capacity for recovery. Let’s look more closely at those elements.

Resistance and recovery capacity
Resistance capacity is the ability of a system to minimize the impact of a disruption by evading it entirely (avoidance) or by minimizing the time between disruption onset and the start of recovery from that disruption (containment).

Recovery capacity is the ability of a system to return to functionality once a disruption has occurred. The process of system recovery is characterized by a (hopefully brief) stabilization phase after which a return to a steady state of performance can be pursued. The final achieved steady-state performance may or may not reacquire original performance levels, and is dependent on many disruption and competitor factors.

Risk and uncertainty are different in meaning
The distinctions between supply chain resilience, risk, and uncertainty are often blurred and unclear. Unfortunately, this issue is exacerbated by the fact that some use risk and uncertainty interchangeably, implying that these two concepts are the same. Yet, this is not the case. While linked, they are separate and distinct concepts.

Risk exists so firms have to deal with the possibilities of encountering situations that can adversely affect them. However, not all future events are equally unknown. Past experience offers some insight regarding what events could occur, the probability of occurrence, and the impact. Firms can predict the likelihood of these events over a set time period to help them determine how to potentially react when they occur. Events with a greater likelihood and significant potential impact require greater preparation.

In contrast, uncertainty considers unpredictable events. Typically, these are events that have not been previously encountered. Alternatively, they are events where the type of event falls outside of past experience. In a COVID-19 world, supply chain leaders need to adjust best practices away from being reactive or bureaucratic.

Use digital twins to create a resilient Supply Chain
Given that Supply Chains need to be redesigned to treat disruptions as the norm and Supply Chain Resilience, we believe that the use of digital twins will increase. Organizations can use them to create business process simulations that can be updated in real time as circumstances change. For example, this could include finding the best way to shift production to alternate locations, move inventory to different warehouses, increase or decrease safety stocks and be better prepared overall.

Supply Chains have grown in length and complexity as companies expanded around the world in pursuit of margin improvements. According to a McKinsey study, since the year 2000, the value of intermediate goods traded globally has tripled to more than $10 trillion annually. However, these choices can sometimes lead to unintended consequences if they are not calibrated to risk exposure. In this blogpost we will dive into the concept of Supply Chain resilience and how you can create a resilient business with a modern Supply Chain.

The definition of Supply Chain resiliency
The concept of Supply Chain resiliency traces its roots back to the work of C.S. Holing, an ecologist who first noted the characteristics of a resilient ecological system in 1973. Since then, the notion of resilience has been applied to fields as diverse as psychology, systems thinking, disaster management, and, more recently, Supply Chains. For some, resilience is a reactive capability that occurs after a disruption or shock has taken place. Others see resilience as more proactive efforts toward helping the firm prepare for disruption. Considering these different observations, it is not surprising that there is confusion surrounding this key concept.

We define Supply Chain Resilience as:

“The ability of a Supply Chain to both resist disruptions and recover operational capability after disruptions occur.”

As mentioned above, viewed from this perspective, resilience consists of two critical but complementary system components: the capacity for resistance and the capacity for recovery. The distinctions between Supply Chain resilience, risk, and uncertainty are often blurred and unclear. On top of that, some use risk and uncertainty interchangeably, implying that these two concepts are the same. Yet, this is not the case. While linked, they are separate and distinct concepts.

Supply Chain networks are typically designed for efficiency, cost, and market proximity, but not necessarily for transparency and resilience. Now they are operating in a world where disruptions are regular occurrences. Averaging across industries, companies can now expect Supply Chain disruptions lasting a month or longer to occur every 3.7 years, and the most severe events take a major financial toll.

Risk exists so that firms must deal with the possibilities of encountering situations that can adversely affect them. However, not all future events are equally unknown. Experience offers some insight regarding what events could occur, the probability of their occurrence, and the impact. Firms can predict the likelihood of these events over a set time to help them determine how to react if they were to occur. Events with a greater likelihood and significant potential impact require greater preparation.

93% of Supply Chain leaders plan to increase resilience
Every Supply Chain leader seeks an optimally designed network to reduce costs while improving its resiliency, efficiency, customer service levels, and competitive advantage. Furthermore, business and Supply Chain leaders understand that changes in demand, service expectations, market costs, and reverse logistics can affect the effectiveness of Supply Chain networks. Hence, it could be a business advantage to periodically re-evaluate the Supply Chain design or determine whether a restructure is needed. However, this can be quite costly and time-consuming when done manually. According to a McKinsey survey, 93% of global Supply Chain leaders plan to increase resiliency, and 44% would increase resiliency even at the expense of short-term savings.

Most companies are still in the early stages of their efforts to connect the entire Supply Chain with a seamless flow of data. Digital technologies can deliver major benefits to efficiency and transparency that are yet to be fully realized. Companies now have access to new solutions for running scenarios, assessing trade-offs, improving transparency, accelerating responses, and even changing the cost structures.

Supply Chain complexity is rising
The need to source products from farther around the globe and move them faster while delivering at lower cost has increased complexity and risk while making it harder to respond to sudden disruption. Companies have typically managed their Supply Chains with relatively stable networks, policies, and modes of transportation. This can be challenging in a world of uncertainty. Old ways of planning driven by static assumptions around Supply Chain design are no longer enough. There is an increasing acknowledgment that resiliency necessitates building optionality in nodes, modes, and flows of Supply Chain designs.

We also live in a world of accelerating change, where the future is less and less a copy of the past. Some would argue that change has been accelerating. This sudden acceleration is the product of radical shifts in the growth of computational power and network capacity. For example, an iPhone has nearly 6000 times more transistors than the i486 chip that powered PCs in the late 1980s. Global internet traffic amounts to more than 46,000 gigabytes per second, a nearly 40-million-fold increase since 1992.

Demands are shifting
Both business-to-consumer (B2C) and business-to-business (B2B) companies expect to see meaningful shifts in the shape of future demand. This will affect commercial models. During the COVID-19 pandemic, many households prioritized buying goods (especially basic products such as groceries) over services (such as restaurants and hair salons, many of which were closed anyway).

As a result, pent-up demand could lead to a spike in spending on services as and when normalcy returns. What is still unclear is which services will return and in what form. For example, consumers have been spending more on home-based products, such as streaming and meal delivery. Will those preferences stick, or will consumers revert to their pre-pandemic habits? Or something in between? How quickly will travel and related services recover, and what will consumers expect from these experiences?

The expectation for seamless on-demand delivery will likely require companies to collaborate with the ecosystem in networks. Also, we will see that they will require a personalized experience, which could increasingly replace more traditional, isolated channel strategies. Few companies will be immune to these shifts.

The Supply Chain should be an integral part of the business strategy
For companies competing on a global scale, things can change quickly. All too often, Supply Chain strategy and business strategy have been kept separate. Driven by greater global complexity and the enormous stress that has been placed on networks, from higher customer expectations to dynamic delivery solutions, companies should challenge the traditional thinking that the Supply Chain exists simply to meet the commercial needs of the business. Instead, Supply Chain considerations should become central to business strategy.

The business must be agile in responding to change
Supply Chain agility can be defined as: “The ability to respond rapidly to unpredictable changes in demand or supply.” Many companies are at risk because their response times to demand changes or supply disruptions are too long. Two key ingredients of agility are visibility and velocity. Supply Chain visibility is the ability of all members of the Supply Chain to see from one end of the pipeline to the other. Visibility, for example, implies a clear view of upstream and downstream inventories, demand and supply conditions, and production and purchasing schedules with clear lines of communications and agreement on “one set of numbers.”

Velocity is defined as: “Distance over time.” To increase velocity, time must be reduced. Here we are talking about “end-to-end” pipeline time, i.e., the time it takes to move product and materials from one end of the Supply Chain to the other. It is not just velocity that matters in the creation of agile Supply Chains. It is acceleration. In other words, how rapidly can the Supply Chain react to changes in demand, upwards and downwards? These are the basic foundations for improved Supply Chain velocity and acceleration: Streamlined processes, reduced in-bound lead times, and non-value-added time reduction.

Utilize the digital capabilities of Supply Chain planning
Companies, that utilize the digital capabilities of Supply Chain planning, will be much more resilient, better equipped to handle challenges and compete more effectively. What does that mean in practical terms? What is the point here? Firstly, it is not the first time that Global Supply Chains have experienced a disruption and it will probably not be the last time either. But how do you actually prepare for the next ” disruption ” or for some companies – an obvious opportunity to sell more.

Supply chain planning is still, in many companies, based on a 60 year old paradigm. It assumes, that you predict demand and then massage it into the rest of your supply chain. The premise for doing this is, that you are able to create a precise plan that you can execute. But in that, there is one challenge: the lack of being resilient and uncertainty of whether the plan can be kept at all. In the military the terminology “no plan survives first contact with the enemy ” is used. The same goes for the Supply Chain. It is difficult to predict uncertainties. Uncertainties like what future demand looks like, whether deliveries are on time etc. are difficult to estimate. Some companies try to compensate by working with security stocks.

What can you do instead? Our suggestion is that you start working with the resiliency in the way you do your planning, in other words create a resilient planning model. What do we mean by that? The technologies (cloud-based) should be utilized to a greater extent. Also, you should start working with the planning mindset of the company. This means, practically speaking, that you should work with scenario planning (several scenarios at once) and work with your forecasting accuracy. You can work with your forecasting accuracy by automatically taking into account, as examples, seasonal fluctuations, weather, order sizes and the impact of campaigns. Machine learning combined with human fine-tuning can help improve the demand model over time.

Work with a “Digital Twin”
Another initiative would be to create a physical supply chain and align decisions across the supply chain by working with a “digital twin ” i.e. a digital model of your current Supply Chain. With the digital model of the supply chain you will be able to simulate, how resilient your Supply Chain will be facing a certain variation and uncertainty. It will be possible to test how the Supply Chain will react under different scenarios. It is not possible to guard 100% for the unknown unknown. What you can do is to invest in a planning model and technology that has already incorporated advanced algorithms that are based on a delivery performance towards the markets and at the product level. Technologies that also consider the company’s financial goals such as minimizing working capital, maximizing margins and reducing the risk of an obsolete inventory. It’s about having the technology that constantly helps in making these trade-off decisions.

Companies, that try to plan in the “normal” way will have big challenges in the future. On the other hand, companies that utilize the digital capabilities including automation, advanced algorithms and machine learning will be much better equipped to handle the challenges and compete more effectively.

If you would like to learn more about a digital twin, checkout this blogpost.

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