How Network-Aware Supply Chain Planning Drives Resiliency
Unavailability of critical material and components as well as disruptions in supply chain logistics have always been one of the biggest challenges of supply chain planning. Such disruptions are hard to predict, and the uncertainty they cause can lead to plans that are not feasible, negatively impacting a multitude of areas downstream, e.g., shop floor execution.
What we have seen in the past years is that the frequency and magnitude have increased tremendously, hitting all regions and all markets almost equally. This led to logistics risks and production still-stands, often with a negative impact on company’s business continuity, growth, and profits.
Especially disruptions in the logistics world challenged many companies with global supply chains.
Visibility and an early recognition of occurring events that cause or might cause disruptions, such as late deliveries, is key to prepare and potentially adapt to tackle downstream risks and impacts.
Gather insights and provide enterprise-wide visibility
There are multiple ways to gather information from the real-world around disruptions. In many cases, delays are recognized only because the expected time of arrival has passed without the delivery being received. Early on warnings and information from the broader network is, if received at all, often collected in an unstructured format via phone calls and mails from suppliers or third-party logistics providers and get often stuck in the information chain.
SAP Business Network offers analytical applications like Intelligent Insights that provide customers a global logistic situation room overlooking all freight activities and shipment routes across multiple modes of transport augmented with external risk data and the Estimated Time of Arrival (ETA) information. Powerful color coding and filters help the user to focus on the most important activities and alerts. In case of any critical alert the user can drill into the freight order details like planned and reported shipment events and estimated time of arrival.
SAP Business Network for Logistics allows customers to analyze the full object and order flow, e.g., in case a ship is late due to weather conditions or port congestion to understand the freight order cascading down to the impacted purchase orders.
The delays are provided by the logistics providers or respective visibility providers and are calculated by the SAP Business Network in combination with geo-location updates of the vessels.
Since our release in May 2022 the next step was taken, and the delay can now be automatically communicated to SAP S/4HANA and SAP ERP systems where the delivery date of the inbound delivery is updated. This major step allows our customers to use data and insights from the network to infuse further intelligence into their S/4HANA processes (see Link to documentation).
This is a great way to set up information chains between the external business network and the enterprise. However, visibility and insights are useless if no intelligent actions can be taken in the enterprise.
From Insight to Impact to Action
Supply Chain Planning is usually highly interested in such information and one of the key addressees of the updated delivery dates.
Naturally, not every delay will cause an impact in the supply chain network and not every impact comes with high risks. But the evaluation of the impact on plans, production orders and customers’ orders are key to also understand all aspects of a disruption. SAPs Supply Chain Planning Solution, SAP Integrated Business Planning for Supply Chain (IBP) and its supply heuristics and optimizers can evaluate the impact across the entire network. With the tight integration of SAP IBP and SAP S/4HANA, the updated delivery date is automatically updated alongside the rest of the order information.
Heuristics and Optimizers are designed to provide a feasible plan based on the most recent information and to ensure that options, such as alternative suppliers, alternative modes of transport, stock transfer options from alternative warehouses, etc. are considered during the supply runs every single day.
In cases where no feasible options are available, or where the disruptions happen in the short-term horizon or are of a certain monetary impact, planners are automatically informed, for example about impacted orders and the revenue that is being at risk:
Planners can then take further options in consideration that might not be available to the algorithms, for example work with the purchasing team on further alternative suppliers, or as a last resort, inform the critical customers about potential delays in person to keep the business relationship running.
Further read: SAP’s Bold Vision to Strengthen the World’s Supply Chains