What if… you really could “what-if” in your supply chain?

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We’ve all asked ourselves the question… what-if?  What if I bought that new car? What if I took that job?  What if I won a million dollars?  It’s fun to dream.  But sometimes the what-ifs are slightly more mundane yet still important…. especially when you say “what-if” with your supply chain.

  • What if I could decrease the lead time on this part? What impact would this have on safety stock?
  • What if I accepted this large order? Could I build it by the due date? What other orders are impacted?
  • What if my key supplier suddenly couldn’t deliver for three months? What would that do to my revenue? What customers are affected?
  • What if I shifted production to a new supplier that had much lower costs but higher lead times? What would that do to my margins? My inventory levels?

The list goes on… we’ve only barely scratched the surface of the types of what-if analysis that supply chain professionals try to do every day. The challenge supply chain planners and analysts face every day is that the tools they are provided really don’t support what-if analysis. ERP systems don’t support multiple simulation scenarios, they have fixed, part-by-part reporting that doesn’t support further investigation, and it takes hours to run the batch processes needed to evaluate a significant change. Since they can’t effectively perform what-if analysis in the ERP system, supply chain analysts often need to model these key decisions using Excel. And while Excel is an excellent tool for doing basic models, it simply cannot effectively capture the complexity of a real supply chain. Layer on top of this, the errors that inevitably end up in any Excel model, and you are often making key strategic and tactical decisions based on a flawed model. So, what is needed to support the supply chain professional when they ask the question, what-if?  It comes down to a number of key capabilities: Ability to create multiple scenarios instantly – To unleash the power of supply chain what-if, you need to enable users to instantly create multiple scenarios that each represent the entire supply chain data.  Imagine this scenario being like your own private copy of your ERP system. You can do anything you want in that copy, see the impacts of your changes and if you don’t like them – simply delete the copy and start over. In-memory analytics and data – It’s not feasible to try different things if it takes multiple hours to see the results of your changes. If you want to do what-if analysis, you need to be able to make a change and instantly see the result throughout your entire supply chain. Imagine you could see a picture of your supply chain where you see the total demand and supply at every site within your supply network. Now imagine that you make a demand change and you can instantly see that change across your entire network — that’s the power of in memory analytics and data. Configurable resources – The supply chain is a large, complex structure. Understanding the impact of a change can be difficult and often can’t be done looking at static reports or single entity screens. Often evaluating very specific what-if scenarios can require unique ad-hoc reports. You can’t wait months / years for ERP IT contractors to produce your reports. You need to be able to quickly create ad-hoc reports to evaluate your what-if scenario. End-to-end enterprise visibility – ERP systems often permit visibility only within the four or so set of sites that pertain to a specific instance of the ERP software. As such, the limit to the visibility of your changes stops within that set of sites. But often our changes impact the supply chain far beyond the limits of what is within a single ERP instance. To understand the true impacts of a change, you need to be able to see beyond these limits. You need a system that will allow you to bring together the data and planning rules of all ERP systems into a single instance. Only then can you understand the true impact of your change. Resources to assess and compare impact – The purpose of a what-if analysis is to answer the question”what if?” If I make this change, how does it impact my key metrics? How does it compare to other options? With traditional ERP systems it can be difficult to impossible to make those comparisons and understand impact. What’s needed is a simple way to compare the what-if scenario to either annual plan numbers or baseline data against key metrics to see impact. When negative impacts exist, you need the ability to drill into that impact and determine root cause. Collaboration – In supply chain, no one person has all the answers, so being able to collaborate with others is key. Collaboration can be as basic as an e-mail but could also be so much more. In large companies, you don’t always know exactly who is responsible for a given item or customer. Imagine if your supply chain software could suggest the team of people you need to collaborate with. Imagine if you were working on a what-if and you hit an issue you needed help with. Imagine if you could share that what-if scenario and resources that provide the context of the problem with those that could help you. Imagine if there solution could be shared back with you in either the shared scenario or a related scenario that they created. This level of collaboration is what can accelerate your supply chain. So what if you had a tool that supported the level of what-if analysis described above? What would that do to your supply chain?  What would that do to your confidence in responding to the ever changing challenges of supply chain?  It’s fun to dream, isn’t it?

What kind of what-if analysis do you do?  How do you do them today?  Comment back and let us know!


Javier Areavlo
- May 02, 2015 at 8:24pm
Hello John,

I liked your post about supply-chain and all the work that needs to take place behind the scenes. I deal with all the questions imaginable daily, my mission, take time off the process and operate as lean as possible. I do run scenarios and do a significant amount of analysis on a daily basis to keep production from reaching a complete stop. I am still lacking a good ERP system that can assist me in monitoring, forecasting, and scheduling materials better as well as watching our bottom line. What frame work have you use in the past or present that you recommend?

Please advise.


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