The criticality of supply chain scenario planning in an uncertain world

Jim Bralsford, Industry & Solutions Marketing at Kinaxis shares concerns for the life sciences industry's supply chain issues, including rising materials costs, delays, shortages and compliance violations.

After restrictions and lockdowns created unprecedented disruption across the globe in 2020, supply chain scenario planning has risen in importance. Today, with one of the largest exporters in the world in China having adopted a zero-Covid policy, the need to remain agile and plan ahead for the unexpected is no less important in 2022. The recent invasion of Ukraine by Russia has added a new layer of complexity, with EU and US sanctions now in place, and escalating energy price volatility is creating greater concern.

In the context of the life sciences industry, a survey of CFOs found that global life science companies are facing a number of concerns in terms of their supply chain, including rising materials cost (51%), supplier risks or delays (46%), supply shortages (41%) and trade compliance violations (41%). While there’s no one magic solution to fix all of these problems, planners can benefit from leveraging robust, real-time data to build scenarios across the short, medium and long-term.

Growing disruption

While the pandemic shone a spotlight on the challenges facing supply chains, disruption has now been growing over the course of several decades. As businesses become much more reliant on a greater scope of global suppliers and manufacturers, scenario-focused supply chain planning has come to the fore as the best (or only) means of having full transparency over what is happening outside of an organisation’s own four walls. The pandemic only catalysed this trend away from silos and towards the need to leverage concurrent scenario planning across the supply chain.

The shortage of skilled workers has added another layer of complexity to the uncertain economic climate. Research has found that a lack of digital skills and talent is a particular concern for senior individuals in the life sciences sector. Talent shortages are not unique to the supply chain: everybody in the industry is in it together, so the need for more advanced scenario planning solutions to provide a single source of truth for more accurate evaluations across the supply chain is more pressing than ever. 

Gaining clarity

With cost savings required in the immediate term and greater resiliency needed in supply chains to tackle uncertain future events, scenario planning is moving up the priority list as organisations look to take control. There are two approaches when it comes to scenario planning: known and expected challenges and completely unknown disruptions.

For the challenges which can be expected, well-defined KPIs and numerous potential options can enable effective scenarios to be devised. Combining these options with dashboards and scorecards that clearly articulate the expected outcomes of each choice can enhance decision-making, giving businesses that all-important pivot ability and a clear understanding of the impact of successive changes.

It’s a little more difficult for the disruptions which can’t be anticipated. With so many tweaks and variables needing to be considered, supply chain planners need the ability to quickly eliminate those choices that are not going to meet the KPIs. The faster scenarios can be run, the more options can be attempted, piece-by-piece, to give businesses the best chance of finding a solution that works. 

Quickening the pace

Speed is therefore a critical asset when global supply chain disruptions are presented. If a disruption continues to affect the supply chain, life sciences organisations are more likely to take a hit on delivery speeds and overall revenue figures. For supply chain planners, the pressure is on to quickly get ahead of problems to avoid ripple effects across the rest of the organisation.

Previously, professionals took a laser-focused optimisation-based approach to supply chain design, with the need to reduce costs and uphold efficiency. The race to chase down the perfect plan, or flawless 100% forecast accuracy, disadvantaged many practitioners as their singular focus on optimisation led to them failing to build enough agility and resilience into their supply chain. It would take hours or even days to calculate a plan, causing them to completely miss the boat when fast-moving disruptions such as Covid occurred.

Now, this story is moving on to its next chapter, and the life sciences industry is realising the urgency of improving agility, speed and efficiency in increasingly complex global supply chains. The sector is now turning to technology to ensure the right balance is struck between agility and optimisation – and advanced analytic techniques are offering a compelling way forward.  

Leveraging data

Data is the key to enhanced effective supply chain scenario planning. Crucially, it gives organisations the end-to-end visibility of operations associated with third-party suppliers, partners and the trends associated with customers. Data insights are crucial in giving planners the visibility and transparency needed to run effective scenarios.

However, transparent data is not enough to provide full value, and it must possess a level of quality to enable organisations to make better supply chain decisions. Without consistent, correct, and up-to-date data, the outcome of a scenario will be fundamentally wrong. Therefore, an effective scenario must be founded on a solid understanding of exposure, inventory, and the true nature of demand – whether it is driven by panic or longer-term trends, for example.

Helping to take data-driven scenario planning to the next level are technologies such as artificial intelligence (AI) and machine learning (ML). With talent shortages and the volume of data in such systems growing exponentially, these solutions provide insights that humans may not have had the ability or time to discover themselves. AI, in particular, can efficiently process data and pass on key insights to human supply chain planners, allowing them to review the insights and formulate the strongest possible “what-if” scenarios. 

Planning for the future

When and how the next significant global supply chain disruption will happen is a mystery to many. One aspect that life sciences organisations can take control of is the building of agility and resilience with data-driven, technology-enabled scenario planning. Research has shown that companies performed 2.5 times better than the industry average during the pandemic when leveraging supply chain management and operation planning software.

As AI and ML technologies grow in sophistication, organisations in the life sciences sector will have more opportunities to fortify their supply chains and plan for potential scenarios. They will then be best placed to cope with any instability moving forward.