The value of simulation in crisis scenarios
Supply chains of companies are getting complex and extended: this increases risks and their management has become essential. If something unexpected happens in the market or to some supplier that interrupts normal flow of materials and resources, it is important to take prompt decisions, based on reliable scenarios. In these cases being able to make simulations is very useful: it can reduce immediate economic damages to the company and, indirectly, keeping customers trust. In many area making simulations is an established practice. In supply chain management the situation is a bit different: planning modules of ERP systems don’t allow simulations because they are anchored to current purchase and productiona plans. And also if they permit simulations, these are limited and simplified. The great usage of spreadsheets witnesses this situation. Also many APS systems lack in supporting simulations, especially if they are based on transactional technologies of ERP or MES, not well suited for massive computations. Unexpected situations for which would be usefule to make simulations can have different origins:
- a supplier is having problems and the impact of its deliveries to our customers must be evaluated. How long will last our stocks of its components? for how long can we feed our production before finding other suppliers of the same materials?
- our competitors in other countries have been damaged by catastrophic events: what will be the impact on our demand and how to fullfill it?
- new norms are threating the demand for certain products (e.g.: plastic bags or some kind of food): which is the obsolescence risk of our stocks? what is the impact on our demand and production plants? how much time is needed to convert materials flows?
- British customers foresee Brexit and want to increase stocks of our products: in the short term we have to manage an increase on plant saturation but future demand must not be overrated
Simulations are useful also without crisis or external exceptional events but for evaluating decisions:
- phase-in/out of products and components
- evaluation of new manufacturing arrangements or changes in the supply chain
- comparison of the impact of different management techniques (kanban, rythm-wheel, etc)
In any case, to have effective answers for new scenarios is important to have simulation tools that are able to:
- model adequately constraints and flows
- represent the future effectively
- elaborate scenarios quickly
- mix real situations and hypothetical parameters, also exploiting unstructured data sources
It does not make sense to wait for crisis before adopting suitable tools to manage it.