PCO – Agile Decision Making to Empower Resilience of Interconnected Supply-Chain Networks

The current scenario

The unprecedented medical emergency the world is currently experiencing is causing serious disruptions to the economy, with a domino effect still hardly predictable in its consequences. Such a situation, including government restrictions imposed to protect the public health of each country, is seriously impacting operating conditions of manufacturing companies.

This ever-changing scenario is only the last challenge supply-chain managers are facing. Many industries are slowing down or closing production facilities, whilst others (especially those producing essential goods) are experiencing a higher level of pressure in order to satisfy the growing demand.

It is clearly evident how, under exceptional circumstances (as well as in normal conditions), external disruptions and environment variability heavily affect the decision making process inside supply-chain networks. An agile software tool, capable of simulating and assessing, in a few minutes, alternative scenarios in a “digital copy” of the real environment, is becoming a prerequisite to support informed decisions, especially when a sequence of unpredictable events may turn out.

A change of mindset is therefore necessary in managing a Supply Chain. It is no more a simple matter of forecasting demand uncertainties of a seasonal market… or assessing the market launch of a new product … or analyzing impacts of moving a production line from a plant to another one…

To govern today’s strictly-interconnected-supply-chain networks, a digital “contingency planning” approach pursuing agility and promptness, could support the company to go through special situations, making use of all resources as efficiently and effectively as possible, assessing consequences on sustainability and profitability of the business itself… In a few words, achieving company resilience.

COMPASS10 Plan Cost Optimiser (PCO) is a simulation software designed to optimise the total cost of complex and interconnected supply-chain networks. Its goal is to provide digital support to make rapid and insightful decisions with reference to  sourcing, production sites and markets in an interconnected environment, and help managers continuously evaluate and re-assess strategic and operational decisions.

PCO capabilities

PCO is capable to simulate, easily and rapidly, the optimised production plan in terms of global cost, considering market demand, availability of constraining resources and cost drivers of the entire logistic and production environment.

The powerful and extremely fast RAM-based algorithms allow the user to easily set-up “what-if” scenarios, to simulate the dynamics and the unpredictable events of the real Supply Chain context, and to assess the impact of possible future events on core business processes.

PCO in-RAM algorithm is capable of assessing the following cost drivers:

  • Costs required to adjust production capacity

  • Inventory costs, considered from the financial, obsolescence, safety perspective

  • Costs arising from relocating production to alternative facilities

  • Costs for alternative sourcing, also in the view of unpredicted events such as failed deliveries from established suppliers

  • Costs required to transfer finished goods from a production plant, which is not the “default” one, to the destination market where demand originates

  • Costs arising from unsatisfied demand (lost sales or late deliveries), to assess the trade-off between the costs to increase capacity/stock versus missed profits, among the viable solutions

PCO benefits

In conclusion, the added value of PCO, compared to other software tools available on the market, can be summarized as follows:

  • high processing speed, key element to pursue a dynamic approach based on digital simulation: a rapid response is mandatory to react to events and regenerate as frequently as possible supply chain plans

  • easy and agile modeling of the elements of the supply chain network, with no need for advanced mathematical skills.

The capability of reacting rapidly is a key factor: whilst a MILP solver can take up to 60 hours to produce the “optimal production plan”, COMPASS10 PCO, in only 5 minutes, is capable of producing multiple alternative scenarios, which deviate from the optimum by a few percentage points only, allowing decision makers to identify the most desirable "contingency plan" to implement, in order to cope with the challenges they are facing.