Here is how you can increase supply chain sustainability and resilience:

Supply chain sustainability and resilience go together

The business world is full of attempts aiming at supply chain circularity and sustainability. Companies are rolling over each other announcing dates on when they will be CO2 neutral and realize their climate goals. In a world where companies must pay for emitting CO2, redesigning supply chains and optimization of the supply network can make a difference. This raises questions like; can facilities nearby serve the markets? Can we save on transportation and reduce our CO2 emissions?

In parallel, the drive towards circularity asks for integrating return flows into the forward supply chain and building an integral closed loop or circular supply chain. We should avoid creating global flows of disposed products and materials to recover residual value. Regionalization is likely to be the best answer. Recover the value in the region where the product was produced and consumed. Regionalization (or nearshoring / reshoring) is the same solution proposed to mitigate supply chain risks. This movement is gaining traction; according to a recent survey of supply chain managers by Gartner the pandemic has prompted 30% of firms to shift the focus of their supply chains from global to regional.

Drivers for redesign and benefits

Next to supply chain sustainability and risk resilience, there are several other situations where supply network design and optimization can bring additional value to organizations:

• Optimizing an organically grown supply chain to be fit for the future with optimal allocation of supply to markets by balancing costs, inventory, and service. This ranges from optimizing the production and distribution footprint, and the portfolios it supplies to markets, to considering new transport modalities on costs, speed, and environmental aspects.
• Harvesting synergies after mergers and acquisitions by leveraging the new possibilities and removing the doublures. Next to closing locations, a major gain is in optimizing the allocations from suppliers to factories, factories to distribution centers (DCs), and DCs to markets too.
• Preparing for future growth; typically, strategies focus on products and market. The supply base follows. The recent crisis clearly shows the relevance of the supply chain. Proactively developing your supply chain along with your strategy is a good practice.

The benefits of supply chain network design and optimization can be significant. At EyeOn we often see cases achieving single- and double-digit millions of euros savings. And with respect to savings, let us not forget the ‘hidden’ costs of complexity and risk. Many companies have learned this the hard way over the last years.

Expertise needed

In times of big data and artificial intelligence, redesigning a supply chain has become an advanced science. Excel models do not fulfill the needs. Considering the amount of data to process, the computational power needed simply isn’t enough to handle moderately complex supply chains. This becomes more evident once multiple scenarios and sensitivity analyses are asked. This is not optional, but a must. The goal is to build a more resilient supply chain. To be successful, you need to combine business expertise and understanding of your strategy with thorough data science expertise to make the calculations. As consultants, we can help!

Keep your supply chain design models live (’Digital twin as-a-service’)

In a fast-changing world, it is worth considering not only designing a robust supply chain for the current dynamics but also assessing its purpose for unforeseen changes. For this reason, we recommend raising the frequency of supply chain network evaluations and building the capability. This can be done in-house but can also be outsourced as a service! After a turn-key project, we offer our clients the possibility to transfer to a service model, where we keep the model live and up to date with the latest data and are ready to run a scenario when needed.

We are here for you!

Are you ready to revise your supply chain network design or optimize it? We are here to help you in this journey. Together we will take the steps towards a more resilient and sustainable supply chain. Contact us now!

This is the time to build resilient, agile, and sustainable supply chains, maximizing the benefits of digitalization and advanced analytics.

The post Rethink your supply chain for increased sustainability and resilience appeared first on EyeOn.

Read more in the Supply Chain Magazine’s trend interview (in Dutch) with EyeOn Managing Partner and Senior Consultant André Vriens.

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How to plan in a post-pandemic world: Five key focal areas in 2021

The post Seize opportunities with the help of digital transformation appeared first on EyeOn.

New technologies offer the opportunity to accomplish a more data driven supply chain. This made companies rethink their business planning processes. In this webinar we shared our vision on how to embark on the digital transformation journey and how to take the momentum of the Covid situation to take action.  

This webinar is part of the ‘Accelerate the digital transformation’ webinar series in which we touch upon the different building blocks of end-to-end supply chain transformation, with a webinar on the EyeOn approach regarding this topic, the next-generation IBP, and tool selection.  Also we will review a number of the current APS solutions on the market. Check out our upcoming events.

The post Webinar ‘Accelerate the digital transformation – Introduction’ appeared first on EyeOn.

1. Re-instate statistical forecasting

The key assumption for statistical forecasting that “the past is a good predictor for the future” doesn’t hold anymore, which presents a new challenge in forecasting and demand management: Can we still generate a meaningful statistical forecast in our planning system, if past demand patterns are heavily disrupted? The answer is yes, and here are two methods how: 

Tetris correction  

This technique consciously fills plummeted sales gaps in the disrupted period to recover the demand pattern. It can also be used in case sales peaked exceptionally. However, the resulting statistical forecast might not be fully usable if it is expected that demand will again behave in a disrupted way in the future. To still generate a proper baseline in this case, that only needs limited manual enrichment, another method is available in our toolkit:  

The Rubber Duck 

This method applies future ‘disruption and recovery curves’ on the right aggregation level (e.g. country-product family), to reflect expected demand disruption throughout the selected portfolio scope. 

2. Optimize your working capital

Companies today are facing tremendous inventory challenges, balancing between controlling the stocks and maintaining their customer service levels; demand patterns have changed both up and down; inventory levels were based on the past stable situation. It is vitally important to bring focus and create a plan to cope with the challenges. What can you as a company do first to get the fast-working results without costly long-time efforts? 

The answer is simple – create insights in your main inventory, service level, and cost drivers. It is impossible to optimize your parameters without knowing the as-is situation. Use the insights to define the most effective prevention and counter measures. As a next step, restore supply chain balance and enhance the quick wins with smart analytics. Only then start regularly updating your inventory parameters based on the latest trends in demand and supply, leveraging the knowledge of the planners. Monitor the progress and the results to keep your settings optimized for the future.

3. Use your IBP process to manage the dynamics

Current business reality has taught us that being able to deal with dynamics is pivotal to be successful. A well-functioning IBP process is critical to reducing the latency in responding to events happening in the market and allows you to make high-quality decisions. IBP is a cross-functional business process involving finance, sales, marketing, and supply chain. Situations change fast. Grab new opportunities and have an agile response to the unexpected.   

Bring your IBP process to its full potential and keep evolving in line with business needs. How to get started:  

1. Assess & benchmark your current maturity 
2. Design & implement a fit for purpose IBP process 
3. Coach stakeholders on various levels in the organization 

4. Re-design your supply chain

Global supply chains with single sourcing have become a common set-up for competitive reasons over the last decades for many companies. Three main forces drive reconsideration of this set-up and the need to re-assess your supply chain configuration:  

1. The Covid crisis, with lockdowns, the closing of markets shows the vulnerability of global set-ups.
2. The growing politicization and uncertainty in free trade require more resilient supply chains.
3. The need to consider the environmental impact of the current supply chains. In the circular economy, shorter supply chains with integrated return flows are more sustainable.

Supply chain redesign starts with translating the business strategy into supply chain requirements. Consider building a digital model of the as-is supply chain (“digital twin”). This can be used for the optimization and evaluation of scenarios on various criteria like costs, service, environmental impact, and risks. Uncertainty asks for more frequent evaluation of the supply chain configuration. Leverage the developed digital supply chain model and build your capability. 

5. Accelerate the digital transformation

Digital technologies have changed our personal lives via WhatsApp, Instagram, Airbnb, Uber, and Spotify. This change has also a large impact on your value chain. Considerable investments are being made to enable the digital transformation in the planning domain, companies are taking big steps towards increasing the level of automation of their planning processes. Getting digital holds the promise of efficiency of tasks that once required substantial time and human effort. It also involves improving the quality of forecasts, plans, and decisions through mining large amounts of data to discover new insights that were previously inaccessible.   

Advancements need to be made in collecting and engineering data, implementing new tools that allow for more advanced analytics, preparing your organization, and building a data-driven culture. Start with developing a vision, select a business process to work on, and take it from there by running projects to explore benefits and learn data science tools that go beyond the existing planning tools, build capabilities, KPIs and data. 

Readjust your planning and forecasting to a post-pandemic world, start by getting in touch with our experts! 

What about the supply chain challenges in 2022? We got you covered!

The post How to plan in a post-pandemic world: Five key focal areas in 2021 appeared first on EyeOn.

Overcoming crisis with gains

The Corona crisis has dramatically changed the way companies around the world are managing their supply chains. Alongside with supply disruptions and manpower shortages, businesses encounter problems with the effectiveness of their forecasting capabilities during this turbulent period. Demand planners can’t rely on past data and, as previously, confidently use it to predict further development. Unpredictable and substantial short-term demand fluctuations overshadow the picture even more, distorting forecasting abilities and leaving supply chain departments without tools for steering the business. Business-as-usual is no longer an option for the majority of companies and they start looking for more advanced solutions.

Robust scenario analysis is the best solution for this volatile environment

EyeOn has numerous tools that go far beyond traditional history-based forecasting techniques. Our consultants have been working for years with various industries that have experienced diverse business challenges. Companies ask for our support to overcome these issues, advancing their demand planning capability to a whole new level. The level of uncertainty during the corona crisis is almost unprecedented. Our planning experts have no doubts that robust scenario analysis is the best solution for this volatile environment.

Find optimal safety stock levels and improve inventory management performance

One of our customers is a global leader in the area of dyes and specialty chemicals. The Corona wave impacted the company’s supply capabilities as well as demand potential. The traditional forecasting method that they used could not manage this level of turbulence and created a great challenge for the whole supply chain. This triggered their interest in EyeOn’s tools to improve their forecasting and inventory management practices. Our team was able to come up with the right solution in a matter of just a couple of weeks. EyeOn prepared a set of business scenarios for demand planning which incorporated various inputs from the customer as well as our deep understanding of supply chain in the process industry. It included a basic scenario and a range of additional more pessimistic or optimistic predictions based on a comprehensive analytical model. These scenarios were applied by the management as the basis for their planning. Each demand scenario included an inventory management roadmap that clearly explained how stock should be managed in each case. The approach helped to find optimal safety stock levels and improve inventory management performance. Thus, the company was able not only to maintain their forecast accuracy on a high level but also to manage their inventory in the most financially advantageous way.

Establish data-driven decision-making process

However, this was only the first step of the forecasting enhancement process. To help the customer navigate a rapidly changing environment EyeOn created a special planning solution. Anaplan supported by PowerBI served as a main integrated tool and simplified the evaluation of influence of different customers’ demand drivers. The solution combined with specially designed KPI dashboards provided insights regarding the real-time impacts of the Corona crisis and helped to reveal an accurate snapshot of the company’s day-to-day situation. The company was thus enabled to adapt its own scenario planning if the business environment changes. Under EyeOn’s supervision demand planners started to employ these new ways of working and in a couple of months the planning department was fully reinforced with the new powerful solution. Planning became the key function during the crisis period providing valuable demand and supply insight to the management team. As a result, a healthy data-driven decision-making process was established within the company. It helped them to avoid the devastating consequences of the ‘bullwhip effect’ and to keep inventory levels and working capital under control on all stages of their supply chain.

Conclusion

During a crisis, deep insight and understanding of the entire chain are key to handling it properly. EyeOn is equipped with world-class experts, cutting-edge solutions, and in-depth business knowledge. These factors help to quickly identify customer’s needs and to deliver robust solutions rapidly. During the last crisis, it became obvious that commercial survival depends on resilience and adaptability to fluctuations and disruptions. Readiness is everything.

Do you want to enhance your planning capability? We are happy to accompany you on this journey! Contact us now.

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Inventory reduction strategy

Many markets and companies are recovering from the disruptions COVID-19 has caused. Markets are opening up again and production facilities have resumed production. Faced with a high uncertainty on how the economy and markets will recover, CEOs are forced to cut costs and free up money by reducing stock. On the other hand it is increasingly important that customers are served at the desired level, thus a solid stock reduction strategy is required. This brings us to the question of this blog: inventory reductions, what are do’s and don’ts?

Don’ts!

1. Focus on overall lowering safety stocks. I more and more hear companies start to decrease their safety stock levels across all items with a certain percentage, even up to 30%! Don’t do it. It will definitely lead to lower service levels – amplified by the increased demand and supply uncertainty that most companies currently face – and a further increase of the bullwhip in the supply chain, with all its well-known consequences.
2. Set target (safety) stock levels using forecasts from stationary statistical forecast models. Demand during the pandemic is definitely not stationary. What to do instead? See number 4 in the list of do’s!
3. Spend time on modelling the impacts of the epidemic itself, how long recovery will take and if and when a “second wave” can be expected. Leave it to the experts!

Do’s

1. Increase production flexibility/decrease lot sizes. Creating “flow” and reducing lead times in your supply chain by lowering lot sizes will lead to a lower cycle stock, but make sure operational costs only grow marginally!
2. Reduce complexity/diversity product portfolio. Make sure you can deliver your important (A) items and reduce the number of unimportant, less value adding (C) items. A nice example from the pasta industry can be found by visting this page.
3. Reduce stock of slow/non-movers by writing them off, increase sales/marketing activity or stop production. But make sure you identify the real slow/non-movers!
4. Forecasting: extract real business drivers and underlying demand pattern and use them to forecast the “rubber duck” or “bathtub” curve.
5. Create E2E-visibility of stock levels across the supply chain. In multiple projects lately we identified many quick wins: double safety stocks in the supply chain were removed, and/or stock was balanced over locations having under- and overstock.

Need help for a quick start?

Is it that simple, just follow the above guidelines? No, every situation requires a tailored approach and not every “do” might be that effective. As a first step, it is important to know how your “inventory pie” is divided over the different sub inventory types (safety stock, cycle stock, strategic stock, transit stock, etc.) and across the supply chain. Based on that, take actions on the most promising stock type(s) and location(s). A nice example of how an inventory dashboard creates such insights, can found by visiting this page. Please feel free to reach out to us if you would like to discuss what your company needs as a first step, our experts look forward to support you along this challenge!

The post Reduce stock value to recover from Covid-19 turbulences appeared first on EyeOn.

The Corona crisis disrupted the worlds’ supply chains and left numerous organizations looking for strategies to cope with the situation. It has shown that crises like these do not follow the monthly S&OP cycle, particularly in an environment with vastly increased volatility and uncertainty due to a global pandemic. New information becomes available every minute. In this rapidly changing environment, improving your reaction speed and reducing decision-latency is of major importance. An effective method to improve decision making is using the newly available data to create different scenarios. This allows you to test response strategies to these possible scenarios and gain competitive advantage. However, as supply chains can be highly complex, this is often easier said than done.

Dealing with uncertainties in the supply chain

Supply chains are most often long and complex but sensing and predicting demand patterns and uncertainties downstream is possible. Upstream, however, lead times are higher, lot sizes are larger, and availability and frequency of data is much lower. You need different strategies to deal with uncertainties in this part of the supply chain. Although scenario analysis has proven to be an effective method for dealing with uncertainty in the supply chain, as of today it is not a widely spread capability.

One of the key reasons for the lack of this capability within organizations is the fact that most APS systems are not responsive enough to support these “what if” analyses. They generally lack the capabilities needed for easy modeling of the supply chain and different scenarios. They also miss the necessary visualization- and comparison options needed to do a quick analysis to gain new insights within seconds. By introducing systems that allow the user to quickly formulate scenarios, evaluate them and use visualizations for easy interpretation, you can easily incorporate scenario planning into your organization and vastly reduce decision latency.

How pro-S&OP can help you deal with uncertainty

In pro-S&OP, which stands for proactive sales & operations planning, scenarios and risks can be evaluated through the use of a digital twin of your supply chain. First, it is important to gain a thorough understanding of your supply chain. Gather insights in the different risk factors that can impact the supply chain. By creating a digital twin of the supply chain, you can analyze and quantify the potential impact of different sources of risk and the effectiveness of the response strategies. This type of risk analysis provides organizations with quick access to easily interpretable visualizations of the possible impact of risk factors or opportunities. An example is the impact of transport routes that are released after having been closed due to the pandemic. As these scenarios can be easily adjusted to new data, and thus new sources of risk, pro-S&OP will allow organizations to detect early warnings, reduce their response times and improve their decision-making process in volatile situations.

Final thoughts

The Corona crisis has shown us that major supply chain disruptions can be caused by unforeseen events we cannot control. Having the capability to perform scenario analyses can be of significant importance in a situation of crisis that we are currently in. Proactive sales & operations planning will enable your organization to quickly create meaningful insights in the risk your organization is facing, while keeping it simple and thus preventing analysis. This will enable you to better evaluate the rigidity of response strategies, vastly decrease your response times and make better motivated decisions, which is of major importance in a highly volatile environment.

Learn more about scenario based planning or check out our content on S&OP/IBP! 

The post Pro-S&OP: the power of models for scenario planning appeared first on EyeOn.

The solution to this increasing level of uncertainty is robust scenario analysis. The EyeOn Planning Services Team helps our customer from the chemical industry with creating different demand scenarios. By combining customer’s business input, we succeeded to map the effect of potential demand changes on safety stock levels and interpreted inventory performance. Offering thus to our customer, a road map of how inventory should be managed according to each demand scenario.

The urgency agile responses is evident, however towards which direction? This is exactly where EyeOn Planning Services can make an impact; for more information explore the Planning Services website, or contact our colleague Bohdana Shumanska.

The post Creating different demand scenarios appeared first on EyeOn.

Proposed solution: rubber duck curve

The proposed solution is the rubber duck curve forecast adjustment. The figure below is called the rubber duck curve, because it has the shape of the beloved bath toy. The idea is simple and intuitive. The method divides the time horizon into four moments: regular sales, disruption, recovery, and new normal. The method assumes that the regular sales will follow the patterns of the statistical forecast in a stable environment. Then, the impact of Covid-19 kicks in, causing a decline in demand. A period of disruption starts. As measures to control the infection are eased, the sales are expected to recover. This recovery phase can be perceived in one period, or over a period of time. It is also possible that there is no recovery and the new normal picks up directly from the disruption phase. The new normal is defined as the period with new stable sales. From this point on, the statistical forecasting methods can take over again. Beware that the impact of disruption can also have an opposite effect. Thus, a positive effect on the sales.

Application and implementation

The method is a great concept, but how do you apply it to your forecasting process? To be able to apply this method you need to have knowledge about the expected impact of the virus. This knowledge is represented by three key moments in the curve: start of disruption, start of recovery, and start of the new normal. Each moment is characterized by a starting point in time, and an expected percental change in sales with respect to the forecast before the disruption started. If you have identified each moment, you can impute the expected behavior to your statistical forecast. The statistical forecast incorporates the trend and seasonal effects, so the future forecast has the right demand pattern adjusted with the knowledge about the expected impact.

The way in which these moments are specified is through a template. Information about the expected disruptions is gathered here. The template is flexible to allow the specification of each of the moments at the right hierarchy level. This ensures that the adjustments match the level at which companies can expect the disruption. Additionally, this allows for a fast adjustment of the entire portfolio, without having to provide an expected change at the lowest hierarchy levels.

Example

The figure below shows an example of rubber duck adjustments and a filled-in template. The first columns of the template indicate the hierarchy level which is impacted by Covid-19. Then, the next three columns indicate ‘when’ a new phase starts, and the last three columns indicate what the percental change is.  The graph shows that starting on May 2020 there is a change of -30% in the expected demand; the disruption phase has started. Then, in November 2021 the recovery period starts with a change of 15% in comparison to the reference forecast. Finally, the new normal starts on February 2021 and the sales are expected to stabilize again. From this moment on, the statistical forecasting method can take over again and rubber duck adjustments are no longer needed.

Benefits

Adding the rubber duck curve to the statistical forecast can provide a good foundation for future demand planning. Consequently, there is no need to adapt each individual forecast in an enrichment tool manually due to unrealistic mid/long term statistical forecast figures. Furthermore, the template can be updated easily during each forecast cycle based on the latest insights. Lastly, the rubber duck curve can be implemented fast and can be easily reapplied in case of a another Covid-19 wave. 

In conclusion, combining the power of statistical forecasting with the knowledge about expected impact on your business as a rubber duck curve, provides you with a Covid-19-proof method for forecasting.

Please feel free to contact us for more support!

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Read here the article (in Dutch)

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