How to be risk-aware and resilient in your supply chain or what can you really gain by a risk-aware supply chain planning?
No doubt, the last years were very disruptive and put a lot of stress on supply chains as such and for sure this is not going away in future, the opposite is true.
Now, let us have a closer look into what is happening in business and what are the challenges supply chain leaders face today, plus elaborate more upon potential solutions.
We are all living in a complex and pretty uncertain environment so the ultimate question is, how can you take effective and aligned decisions? Moreover, how can you balance all these objectives and constraints which are contradictory? Targets like efficiency, profits, and costs on one hand, but also achieving goals like sustainability, service levels as well as managing risks and being resilient overall at the same time. And finally, how to be able to respond quickly and adapt with agility upon changes you constantly face.
Gartner puts it to the point, by saying “the future of supply chain is cost-optimize and balance risk with agility”.
So how can you achieve a more risk-resilient supply chain in future as a supply chain officer?
- Start with testing of the robustness of the supply chain to identify weaknesses, cascading effects, and breaking points via business continuity analysis
- Include external information in planning, knowing about relevant external partner data and risks and disruptions in time
- Plan scenarios and test options and by using simulations of alternatives
- Respond to exceptions faster in planning by using extended visibility and understanding impact and required actions better
And how can supply chain planning systems and software help you to support these challenges?
First, let’s differentiate between the horizons and levels you are looking into.
- Key is to actively detect, analyze and manage operational risks (external ones and internal ones) and reflect them in your plans daily. These risks are more operational like e. g. an upcoming hurricane and might affect you near-term plan in the next days and weeks.
- Secondly, and this is more strategic, you need to ensure to be better prepared as a company for upcoming ‘big swan events’, high-impact events, and general uncertainty and consider this in combination with potential impacts in your mid to long-term plans. This means e. g. how to manage pandemics or a geopolitical crisis better in future.
Let us investigate how you can transform your company by changing the way you plan and synchronize business decisions.
The following approach could be a suitable path:
1st step, introduce an Integrated Business Planning process to break down horizontal and vertical barriers by synchronizing business decisions. With SAP Integrated Business Planning (SAP IBP), SAP offers an integrated supply chain planning solution that is agile and nimble. It synchronizes all relevant parts of the business enterprise with your current planning and a robust scenario planning across different planning horizons. It allows supply chain to effectively address current pain points and better anticipate the impact of the next disruption.
2nd step, extend your supply chain planning beyond your four walls by collaborating with your external business partners via business networks to gain enhanced visibility and enforce more reliable planning results. SAP Business Network connects people, processes and systems across multiple enterprises, digitalizing transactions and creating transparent, resilient and sustainable supply chains. It is so a perfect addition to grow towards a network-aware supply chain planning.
3rd step, ensure your business continuity by using a sensitivity analysis and executing a vulnerability scan to find your breaking point upfront in your supply chain, all in time and so early enough to mitigate them. We work together with a partner Cosmo Tech, who is a leading digital twin simulation software provider, to offer a business sensitive analysis to understand better your breaking points in the supply chain via a vulnerability scan and so get a better readiness and stability for upcoming shocks.
4th step, continuously manage your internal and external risks effecting your supply chain, including an impact analysis in planning on your revenue, costs and critical orders to make your planners aware of those risks and mitigate them intelligently with advanced alerting and scenario planning. In SAP IBP you can already assess all your internal risks effecting supply chain planning by using a dashboard based on analytics stories focusing on Demand, Supply, Inventory and Carbon Footprint risk scores with the option to drill down for further investigations. Yet our clear innovation path is to partner also with risk management software providers like Everstream to integrate external risks into planning as well. The goal is to visualize this input via our geo-map alongside by offering external risk scores in the SAP IBP Analytics and planning views. Down the road we plan to move towards risk-aware planning that considers the impact of the risks on your business with guided resolution.
SAP and Partners solutions can help to innovate towards a risk-resilient supply chain alongside considering your traditional supply chain goals. Let’s get ready to actively manage supply chain risks and disruptions!