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Supply Chain

Digital Twins and S&OP: Achieving End-to-End Supply Chain Visibility and Control

Julien Broucke
January 18, 2023
min read
S&OP digital twin technology for improved supply chain visibility and control

In today's fast-paced business environment, supply chain leaders are facing increasing challenges to keep up with the volatility and uncertainty of customer demand and supply chain disruptions.

Traditional sales and operations planning (S&OP) processes often fall short in providing the visibility and control needed to make effective decisions. However, with the advent of digital twin technology, S&OP leaders are now able to model their entire supply chain in granular detail, simulating different scenarios and understanding the impact of potential decisions. In this blog post, we will explore how digital twins are enabling S&OP leaders to achieve end-to-end supply chain visibility and control, and how this is revolutionizing the way organizations manage their supply chain.

The Challenges of Traditional S&OP Planning

Traditional S&OP planning processes have long been a source of frustration for supply chain leaders.

The process is often hampered by a lack of visibility and control, making it difficult to make effective decisions. One of the main challenges of traditional S&OP planning is the inability to take into account the inherent uncertainties of the supply chain and customer demand. These uncertainties can range from supplier delays and machinery breakdowns to changes in customer demand and market conditions.

Another major challenge of traditional S&OP planning is the inability to model critical resources at a granular level. This often results in a lack of insight and foresight into the execution of the S&OP plan when faced with changes in critical resources. Additionally, S&OP planning tools and processes often consider only aggregate capacities, such as plant or production line capacity, and do not take into account the specific details of each operation, such as cycle times, product variations, and dynamic changes.

Another pain point is the lack of interdepartmental coordination, where S&OP planning do not take into account departmental interdependencies such as sales, production, marketing, and logistics objectives. As a result, S&OP decisions do not consider these interdependencies, their cascading effects, nor their impact on key indicators.

Finally, the traditional S&OP process is a recurring, monthly process that must be done efficiently within a strict time constraint. This often leads to shortcuts being taken to simplify the process, resulting in a lack of depth and quality of scenario analysis, leading to suboptimal decision-making.

All these challenges hinder the ability of S&OP leaders to make effective decisions and optimize their supply chains. As such, next-generation S&OP solutions are needed to overcome these challenges and provide the visibility and control needed to make effective decisions.

How Digital Twins are Transforming S&OP

The traditional Sales and Operations Planning (S&OP) process has lagged behind in recent years due to its high dependence on historical time-series data and rigid time-bucketed planning fences. These methods are not agile enough for re-planning or continuous planning at speed, especially in today's world of 'never normal' with frequent disruptions like the COVID-19 pandemic, geo-political tensions, and port lock downs that inevitably increase supply chain costs and impede product flow.

With the changing technology landscape of in-memory computing and cloud-enabled platforms, the introduction of digital twin technology is rapidly transforming the way S&OP leaders approach planning. These modern platforms have high computing and processing speeds and are able to run multiple outcome-driven scenarios, ingesting real-time signals in the near-term tactical 6-12 weeks, building a robust short-term tactical planning process.

By using a digital twin, S&OP teams can simulate various decision options and understand the cascading effects of each on the rest of the business, taking into account all of the constraints, uncertainties, and interdependencies that make up the entire system. This allows for better forecasting and schedule attainment, and helps identify risks and opportunities at all levels of detail.

Additionally, digital twins can also help orchestrate demand and supply imbalances, right-size or optimize finished goods inventory across all the internal nodes of the supply chain, and identify risks early while recommending appropriate mitigation strategies. This enables trade-off decisions on transportation mode and flexible buffer manufacturing capacity, typically earmarked for the longer-term strategic S&OP or IBP layer, to now be made in a near-term tactical three-month horizon.

Overall, digital twin technology is revolutionizing the way S&OP leaders approach planning by providing end-to-end visibility and control of the supply chain, and enabling more accurate forecasting, schedule attainment, and risk management.

Achieving End-to-End Visibility and Control

Achieving end-to-end visibility and control is a key challenge for supply chain leaders, particularly when it comes to traditional S&OP planning. In a traditional S&OP process, the goal is to bring together various business plans within an organization, such as sales, marketing, development, manufacturing, sourcing, and financials, into one integrated set of tactical plans. However, the challenge lies in ensuring that the best decision is taken from the point of view of key global business objectives while also considering departmental interdependencies such as sales, production, marketing, and logistics objectives.

The problem is that traditional S&OP planning tools often fail to identify and model critical resources at a granular level, making it difficult to guarantee the process's viability. This lack of insight and foresight results in a lack of control over the supply chain steps, making it difficult to focus on what is critical for the business in a continually volatile environment.

Digital twins, however, have the potential to overcome these challenges by providing a digital modeling of supply chain and demand within the constraints, uncertainties, and interdependencies that make up the entire system. By modeling the organization in granular detail, digital twins help S&OP teams simulate various decision options and understand the effects of each and the potential impact on other parts of the business. This level of visibility and control is essential for achieving end-to-end visibility and control over the supply chain.

The simulation capabilities of digital twins help cross-functional teams understand the cause and effect of varying decisions or changes, providing a global view of the supply chain. This level of visibility is essential today as companies must find the right balance between multiple objectives and uncertainties. With digital twins, companies can model their supply chain in granular detail and simulate various decision options, providing a much-needed level of visibility and control over end-to-end supply chain processes.

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Julien Broucke
Co-founder & CEO, Process Metronome

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