Have you ever experienced Murphy’s Law? It’s when you rehearse a presentation every day for a week only for your internet connection to fail during the live webinar. Or when you’re finally able to schedule a meeting with an important but elusive customer but are forced to postpone it because your car won’t start.
While we sometimes like to whine and blame our misfortune on Murphy’s Law, in most cases, there are ways to ensure a better outcome when things don’t go as planned. Whether it entails preparing a backup connection or leaving home a little earlier so you still have time to call an Uber, proper scenario planning can help you avoid your date with Murphy.
What is Scenario Planning?
Scenario planning is the practice of identifying possible scenarios or potential “realities” for your business to manage risk. The purpose of the scenarios is not to predict the most likely future but to come up with possible alternative endings and gain a certain level of preparedness and control in the face of uncertainty.
In today’s environment, the Covid-19 pandemic is a big consideration in scenario planning, especially for supply chain managers. What if import restrictions tighten in one of your key markets? What will you do if a factory shuts down because of a rise in cases? What will its impact be on the supply chain? What adjustments will you need to make?
It’s good to prepare for various situations, but you can’t plan for every possibility. How do you build and choose scenarios?
It’s best to employ a methodical framework that uses data-driven insights, analysis, and simulations. The process involves the following steps:
- Identify your driving forces – Consider the environmental and business conditions that affect your decision-making.
- Determine risk factors – Pinpoint the critical supply chain risk factors present in your current environment. Pick only a few, most important ones that have the greatest impact on your business.
- Develop a variety of possible scenarios – The first two steps will give you insights that you can use to form possible scenarios. Create a list of critical KPIs defined by supply chain planners and C-level decision-makers to help you in shortlisting scenarios.
- Create and test your action plans – The last step is to evaluate each scenario’s impact and create your action plan per scenario. Each plan must clearly define the organizational roles involved, the types of mitigation measures, and how to use them. Simulations can help to test the effectiveness of the proposed plans.
The Benefits of Scenario Planning
If you haven’t considered scenario planning, now is the time to do so as it benefits sales and operations planning (S&OP) processes such as demand, inventory, and merchandise planning.
As you evaluate the impact of each scenario you’re mapping out, you’ll also be able to:
- Generate accurate demand forecasts and create optimized demand plans around them to achieve greater flexibility in scaling your business
- Determine the number of goods you need to prepare and efficiently manage your inventory in advance to maximize sales opportunities
- Strategically plan the deployment of your merchandise to optimize your maximum inventory, which will allow you to profit more
By taking the time to plan for the most critical and relevant what-ifs, you also perform due diligence over essential areas of your supply chain. This ensures that you can deliver precisely what’s needed, in the right place, at the right time.
The Role of Supply Chain Planning Tools
Data is essential in creating your what-if scenarios and planning the appropriate responses. The more comprehensive the data and the more closely it reflects the actual supply chain, the better it can serve as the basis for scenario planning.
Such data, however, can be difficult to gather and prepare, especially if it exists in Excel files and siloed sources. This is where advanced supply chain planning tools come into the picture. These solutions include comprehensive supply chain data and real-time supply chain planning synchronization. They allow you to visualize different situations and their impact on the critical KPIs you have identified, providing cross-functional decision support. They also allow you to model additional scenarios quickly, run simulations, and easily share this information with relevant parties.
One such tool is Algo, a supply chain intelligence platform where you can create what-if scenarios based on combinations of planned and unplanned events. It also enables S&OP teams to predict outcomes using digital twin models. Algo’s supply chain simulations complement supply chain ERPs so that S&OP teams can utilize the simulation insights in decision-making.
Say Hello to What-if Scenario Planning and Goodbye, Murphy
Remember, planning is not enough when you don’t look at all the possibilities. Give your business a competitive edge with data-driven scenario planning and leverage intelligent simulations to better anticipate and mitigate risks in the supply chain. Maybe then, you can say goodbye to Murphy’s Law forever.
Need expert advice on how to supercharge your supply chain? Contact Algo today and request a demo.