Redefining Supply Chain Planning with Discrete-Event Dynamic Simulation

We were thrilled to take part in the Supply Chain Digitalization Conference, held on May 24-25. Alex Koshulko, CEO & Co-Founder at GMDH Streamline and Natalie Lopadchak-Eksi, VP of Partnerships opened the event, uncovering an insightful topic “Redefining Supply Chain Planning with Discrete-Event Dynamic Simulation”.

The conference brings together supply chain and technology innovators to push forward a complete digital transformation within the supply chain industries. With more than 350 attendees and 20+ speakers, including Amazon and SAP, it was an informative digital event with captivating performances on how to enhance supply chain resilience, agility, and efficiency. It was an excellent opportunity for GMDH Streamline to share knowledge and expertise during a presention on the importance and value of Discrete-Event Dynamic Simulation.

Let us recap and sum up the key takeaways.

Discrete-Event Dynamic Simulation Vs Digital Twins Technology in Supply Chain

Nowadays, due to an increase in supply chain disruptions, supply chain planning has become extremely complex. According to public reports, inefficiency in the supply chain costs 2 trillion dollars around the globe annually. Since traditional approaches are no longer working as well, we need to look at modern approaches, that can deal with the current heightened level of uncertainty.

“With the Streamline team, we are working on implementing Discrete-Event Dynamic Simulation that can help with demand forecasting and inventory planning. A discrete-event simulation (DES) models the operation of a system as a (discrete) sequence of events in time. By modeling with discrete events in time, it’s possible to simulate how the system works”– said Alex Koshulko. “And the digital twin is a well-known approach that can be applied in many industries. Digital Twins create very detailed models of an object. So what are we doing? We use discrete-event simulation as an approach to create the digital twin, a model of how the company works, and provide visibility and support smart decisions that help to avoid losses and disruptions in supply chain.”

Why is it so hard to plan supply chain?

Here are the reasons based on current research.

Inventory distortions

Losses due to inventory distortion has reached $1.9 trillion globally in 2022 and touched majority of businesses (IHL, 2022). COVID lockdowns, economy downturn, and other issues cause demand anomalies and supplier delays followed by out-of-stock and overstock problems.

Law forecast accuracy

Human error is the leading problem in 46% of warehouses (AI Software path, 2020). 67.4% of supply chain managers use Excel spreadsheets as a management tool (Zippa, 2022).

Purchasing constraints

34% of businesses have shipped an order late because they inadvertently sold a product that was not in stock (Peoplevox, 2021).

Lack of visibility and control

Supply chain visibility is one of the top strategic priorities for companies around the globe (EY, 2021). Only 6% of companies report full visibility on their supply chain. 69% of companies do not have total visibility (Zippa, 2022).

What is Digital Twin?

A digital twin is a complete digital copy of all the assets, processes, and operational details that go into the supply chain. Powered by advanced analytics and artificial intelligence, it gives you a comprehensive and deep view of the supply chain performance in all its complexity in real-time and provides you with instant insights on what’s working well, what can be improved, and what potential risks are.

How can Digital Twin level up Supply Chain efficiency?

“The Digital Twin is a long-term simulation of our future,” – said Alex Koshulko.” It can support all processes from planning to replenishment, S&OP and also provide financial forecasts for executives and financial departments. So it can impact all aspects of commercial activities.”

The digital twin can facilitate:

Short-term, mid-term, and long term decision making

Disruptions variations in demand, supply, and replenishment

Mature S&OP process

Forecasts simulations

If we are talking specifically about Streamline, it can run a simulation and roll out its forecast and supply plan several months ahead, executing its own recommendations in a virtual ERP system to show you how your supply chain will look like in the future.

Three Mistakes To Avoid When Dealing With AI-Driven Dynamic Simulation Tools

Trash-in, trash out

Using incorrect data in your simulation leads to an incorrect and unrealistic supply plan. The best way to avoid this is to (1) get an initial demand plan created with the help of an AI-based forecasting tool, (2) get a sign-off from your planning department to use dynamic simulation to enrich it your team assumptions (3) run the dynamic simulation to provide visibility into the future of how your supply chain is most likely to work.

Ignoring the butterfly effect

Even minor alterations in your parameters require long-term recalculations. If you want to look further into the future, you’ll need to launch long-term dynamic simulations repeatedly.

Forgetting about variability

There are many solutions that offer rather simplistic simulation models that can’t match the complexity of your supply chain operations. While many of them let you take into account demand variability, they may not factor in other essential parameters such as lead time variability. Make sure you choose the platform that incorporates both of these parameters as you strive for more accurate and realistic ordering plans.

On a final note

Our experts’ advice for improving your supply chain efficiency:

1. Try to understand where the gaps are in your organization’s Supply Chain.

2. Define the quantitative and qualitative goals you want to achieve.

3. Consult with experts on how to better perform your Supply Chain using a Digital Twin solution.

4. Build a strategy and step-by-step guidance on how to achieve your business goals.

“We are happy to provide you with the expertise based on our experience working with more than 1000 clients,” – said Natalie Lopadchak-Eksi. “It’s our mission to help businesses enhance their supply chain with our digitalized supply chain planning solution.”