SUPPLY CHAIN SIMULATION
Your supply chain... a competitive advantage or your biggest risk?
Global trade is now estimated to be worth more than $10 trillion annually. This staggering figure represents a more than threefold increase since the year 2000. Globalisation, supported by advancements in transport and communication technologies, has spawned truly global value chains as companies merge regional and international suppler networks, decentralised manufacturing and global distribution networks to service a worldwide marketplace.
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Whether you're an international operation or a regionally based manufacturer / distributor you are undoubtedly affected by complex supply networks. This leads to a number of crucial questions:
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Is your supply chain a key part of your competitive advantage?
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Does it ensure you achieve customer service level expectations?
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Do you have too much working capital tied up in inventory?
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Is your distribution network efficient?
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How resilient is your supply chain?
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How would your operation respond if a part of your supply chain failed?
Today's supply chains are complex, interconnected and dynamic, making it difficult to have clear line-of-sight into their effectiveness and inherent - often hidden - vulnerabilities. Supply Chain Simulation Models (digital twins) are a powerful tool that can assist to analyse and stress test even the most complex supply networks.
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Adaptint uses anyLogistix to design and configure powerful simulation models that assist our customers to leverage the power of their supply chains.
Supply Chain Design and Optimisation
Network optimisation finds the optimal configuration of manufacturing and distribution facilities to match forecast demand whilst minimising supply chain costs. Optimisation is an analytical method that draws on the power of a linear solver to assess and compare all possible network configurations.
Using anyLogistix's built-in IBM CPLEX solver we can help you to find the optimal network design that will minimise cost and ensure your service level objectives are met.
Images above illustrate a supply chain network before and after optimisation
Unlike analytical optimisation, simulation takes into account the dynamic nature of supply chain operations. Supply chain simulation models can accurately reflect the behaviour of supply chain over time - including dynamic variables such as demand fluctuations, inventory levels, transport schedules etc. Simulation can also be used to assess the impact of disruptive events such as strikes and natural disasters. (see Supply Chain Risk & Resilience)​
Simulation modelling complements network optimisation - enabling supply chain professionals to both find the best network configuration and assess its behaviour and performance using 'what-if' scenarios that take into account the truly dynamic nature of supply chain operations.
​Supply Chain Dynamics
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Every supply chain is exposed to uncertainties and dynamic events that have the potential to impact business performance. Events such as:
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demand fluctuations,
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bullwhip effect,
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stock-outs,
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breakdowns at manufacturing facilities,
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quality issues,
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transport delays etc.
​Managing issues of this nature can consume as much as 40% of a supply chain professional's time and energy. Supply Chain Simulation Modelling - or Digital Twins - enable operational uncertainties to be managed proactively. Scenarios can be run that enable supply chain managers to anticipate and assess possible consequences of an abnormal condition and then enact strategies to ensure performance objectives are met.
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Safety Stock
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Inventory carrying cost can be expensive. Working capital is tied up, warehousing space is consumed. The drive to maintain lean and efficient supply chains naturally moves most companies to try to reduce inventories to a minimum. Inventory policies are designed to ensure sufficient stocks are maintained to meet service level objectives. This would be simple if demand is fixed - but alas, that does not reflect the reality of the market. Determining the appropriate level of inventory must therefore take into account demand dynamics over time. Calculating the appropriate level of inventory, including safety stock is a simple exercise with the benefit of simulation modelling.
Operational Risks
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Global supply chains are interconnected and exposed to risks where a single failure can have far reaching impacts. For instance, in March 2021 the massive container vessel Ever Given ran aground in the Suez Canal resulting in a total closure of this vital transport link. Supply chains across the globe had to adapt in an instant to the lose of a shipping link estimated to carry 12% of the world's commercial freight and 2.5% of the world's oil trade. One insurer estimated the impact to global trade to be between 6 to 10 billions dollars a week!
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These are just a few simple examples that show how simulation modelling is being used by supply chain managers to improve operational efficiencies, manage supply chain dynamics and create their competitive advantage.
Supply Chain Risk and Resilience
Disruptive Risks
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The spread of the pandemic around the world exposed the vulnerabilities of many supply chains as they came under pressure due to boarder closures and localised restrictions on movements of people. COVID-19 continues to wreak havoc on global trade - however it is not the only major disruption that will impact global supply chains. In fact a recent study by the McKisney Global Institute highlighted that companies can expect to suffer a supply chain disruption lasting more than 1 month, on average every 3.7 years leading to loses of as much as 40% of a years annual profits every decade! Is your company prepared for disruptions of a such a magnitude?
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Unlike operational risks that are typically short in duration and limited in scope - affecting perhaps inventory dynamics or service level performance - disruptive risks impact supply chains at a structural level and can trigger ripple effects that can propagate through entire supply chains. They have the potential to cause catastrophic damage to an operation.
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Supply Chain Digital Twins are a power tool for stress testing supply chains and building resilient networks. Potential 'back-up' supply chain configurations can be developed and tested in anticipation of possible disruptions and or strategies implemented to reduce exposure to identified network vulnerabilities.
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Like to learn more about how Supply Chain Simulation could help you? Call us.