COVID-19 has created a supply shock. Companies are scrambling to figure out how to get the components they need for manufacturing. Clearly, digital war rooms could be useful for multinationals that want to explore a multitude of scenarios and be better able to respond under different conditions.
There are several technologies that it would be sensible to have in these war rooms. RiskMethods and Resilinc provide real-time risk analytics. I talked to one of RiskMethod’s customers who was using the solution’s COVID-19 bubble heat maps. Day by day they could see the bubbles getting bigger in Italy. This multinational was able to shift sourcing and keep their European factories up and running to a much higher extent than their competitors.
Another key technology for a COVID-19 war room would be a supply chain design solution. LLamasoft is the leading supplier of supply chain design software. Their solution is called Supply Chain Guru. Supply chain design software allows companies to look at their supply chain – where all their warehouses and factories are, how their transportation flows through the network – and ask whether based on the projected demand, that is the optimal network. Would a different supply chain configuration lead to lower costs and yet achieve the same or even a higher service level?
But this tool can be used to answer other strategic questions as well. Around supply shocks, like COVID-19 has created, supply chain design software can be used to simulate the cost and service level implications of different flow paths associated with moving goods into factories from different suppliers and regions and then out to customers.
As the recession hits, and companies need to adjust to lower demand for their products, supply chain design can be used to help figure which production lines, warehouses, and so forth should be shuttered and how those closures will affect costs and service levels.
One use case too little deployed is to use supply chain design tools to design a more resilient supply chain that can better weather big, unexpected shocks. As Toby Brzoznowski, the Chief Strategy Officer at LLamasoft points out, in normal times, risk analysis is a low priority project. Cost and customer service are the most common. Then, perhaps, comes sustainability. Now risk analysis is “front and center.”
With the risk model, companies can disaggregate their bills of materials and see how much revenue is at risk if a single sourced component becomes unavailable, visualize choke points, and do contingency planning scenarios. There is a cost to adding redundancy, but in times of turmoil there can be huge upside advantages to having these capabilities.
Supply chain design is a digital twin solution. Companies can evaluate the supply chain in a digital environment to factor in variability surrounding transactions, asset performance, policy rules, and material flow paths throughout the supply chain. LLamasoft has improved their digital infrastructure with a data transformation application called Data Guru. This application enables data analysts to access, manage and transform enterprise data without extensive training or IT intervention.
On top of Data Guru, they have created the llama.ai platform to stage a near real-time supply chain system of record that contains not just a map of the supply chain, but also the supply chain policies! A company can have hundreds of policies around where goods are sourced from, which factories will make which products, inventory carrying policies, transportation modes, and how goods will flow to customers from designated warehouses. The llama.ai platform documents these policies and makes them visible. In short, this infrastructure allows many types of scenarios to be run from a central environment.
There are 30 some use cases where supply chain design tools can help companies make better decisions. According to Mr. Brzoznowski, most LLamasoft customers only have models for two or three use cases. LLamasoft responded by redeploying implementation and consulting employees to do managed services in this area. “We’ve stood up a COVID-19 Response Center,” Mr. Brzoznowski said. Several of LLamasoft’s customers have stood up war rooms to manage operations during the crisis. “We have redeployed our consulting services team to augment the staff of our customers. Our customers can now run different scenarios far more aggressively.”
Building supply chain design models is not easy. While LLamasoft has worked hard to develop templates that speed up users’ ability to run certain scenarios, this is still complex. Supply chain design superusers need a higher skill set than for other supply chain applications. And during this crisis, LLamasoft customers want to run many more scenarios.
It is worth mentioning that LLamasoft has done good work for years developing models to assist dozens of Public Health NGO’s and country Ministries of Health better design the supply chains to run complex testing and diagnostic programs for issues such as HIV and malaria. This technology could definitely be of significant value in the current crisis mobilization efforts and it would be a connection FEMA and other agencies may want to explore.
When it comes to risk management, many companies learn the hard way. Following the Japanese tsunami in 2011, General Motors took a major hit. They subsequently implemented the Resilinc solution and significantly upgraded their risk management teams and strategies. At this point, if a company does not have supply chain design solutions or real-time risk analytics, and they look to add these capabilities, they are closing the barn door after the horse has bolted.
