Around for decades, so-called network or supply chain modeling tools continue to advance in both capabilities and adoption, sometimes now under the banner of “supply chain design” as a discipline.
Recent years have also seen the rise of the “digital twin” concept, a term used in several areas but among the top use cases is to well-model a company’s supply chain, and use that model in a variety of analytic and strategic practices by making more informed decisions.
But these supply chain models aren’t delivering the value expected because they include only a small subset of the full supply chain, with as much as 80% of the reality not included in the model.
Or at least that’s what Gartner and its analyst Suzie Petrusic, say, as argued in a recent press release from the research and analysis giant.
“The vast majority of the supply chain environment is uncaptured by supply chain decision makers’ current digital models,” Gartner says.
Petrusic adds that “Up to 80% of the actual, on-the-ground processes that these technology investments are meant to be ‘optimizing’ are not even reflected in current digital models.”
Naturally enough, if the models and underlying relationships are incomplete, the supply chain decisions made from analysis of the models’ analytics are impaired, Gartner says, to the point that they aren’t much better than decisions made without such seemingly sophisticated tools.
Gartner’s research, based on an analysis of 600 survey responses of supply chain decision makers received in December 2022, found that slightly more bad decisions were made with the use of digital tradeoff analysis than without and that they marginally increased the percentage of bad decision outcomes. The research defined a “good” decision as one that led to and met the decision maker’s expected supply chain performance and cost outcomes with low decision maker regret.” (See graphic below.)
Digital trade-off analysis includes things such tools as what-if analysis, scenario modeling, or simulations using the digital twin.
Rather surprisingly, more than half of supply chain leaders using digital technologies to make a recent strategic decision (e.g., S&OP decisions, network design decisions, or risk mitigation) said that they felt they would have achieved on better results from their decision without the use of their models.
“Our analysis suggests that they are correct,” Petrusic said.
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She added that “The fault is not just with technology itself, but rather with the incomplete picture of the supply chain that these digital tools capture.”
What is a company to do about it? There are a couple of choices, Petrusic says.
(1) Continue down a path towards full digitalization of the supply chain, including distilling complex end-to-end processes into a fully digital model. That model can then drive a level of analytics process adherence “that has thus far eluded [even] supply chain leaders.”
(2) Empower localized and cross-functional leaders already present throughout an organization’s supply chain with what Gartner calls “decision rights.” These decision makers, who benefit from visibility unavailable to their global counterparts and can make use of the technology already available to them, have been shown to make good decisions 11% more often than global, end-to-end decision makers, Gartner says.
“By augmenting this human visibility through digital trade-off analysis technology, these local decision makers are 83% more likely to make a good decision than a bad one,” Petrusic observes.
Chief Supply Chain Officers should Localize more strategic decisions to a cross-functional level, Petrusic recommends.
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