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Enterprise Simulation Planning (ESP) for the Supply Chain
© 2014 LLamasoft, Inc. All Rights Reserved
© 2014 LLamasoft, Inc. All Rights Reserved
What If You Could…
See how your supply chain will perform in the future?
Know exactly how a strategy change will affect service levels and costs?
Predict when you will stock out or reach production capacity?
What impact would this have on your business?
© 2014 LLamasoft, Inc. All Rights Reserved
It’s Possible With Simulation Technology
Advanced simulation technology enables companies to artificially “run the clock” to execute the supply chain in a digital environment
© 2014 LLamasoft, Inc. All Rights Reserved
for continuous supply chain improvement and innovation
Simulation Provides:
A way of testing potential network changes before enacting them, reducing risk of strategy changes
A solutionthat truly factors time and variability into each individual transaction, decision and movement throughout the supply chain at SKU-level detail
Support
© 2014 LLamasoft, Inc. All Rights Reserved
How is Simulation Different from Optimization?
Simulation is
Optimization is
PredictivePlays out each transaction and resulting decision as it would happen in the actual supply chain, within given parameters
PrescriptiveGiven a variety of options, optimization provides the optimal answer
© 2014 LLamasoft, Inc. All Rights Reserved
Enterprise Simulation Planning (ESP)Simulation technology is the tool of choice for planning and testing different variations of current and potential supply chain networks and demand levels
© 2014 LLamasoft, Inc. All Rights Reserved
The Four Quadrants of ESP
Quantification• Validation• Cost Avoidance
Innovation• Strategic Planning• Gamification
Baselining• Visualization• Communication
Forecasting• S&OP/Capacity
Planning• Sensitivity Analysis
Futu
reC
urre
nt
Current Future
Net
wor
k
Demand
© 2014 LLamasoft, Inc. All Rights Reserved
Baselining: Current Network / Current Demand
Visualization• Visualize the current structure
of the supply chain
• Identify inefficiencies, capacity constraints, cost imbalances
Communication• Help analysts communicate to
stakeholders what is actually happening in the supply chain
• Creates consensus and confidence in model data and minimizes challenges to the results
© 2014 LLamasoft, Inc. All Rights Reserved
Quantification: Future Network / Current Demand
Validation• Data-driven proof of how a
strategy will play out
• Predict metrics like on-time deliveries, capacity utilization, stock-outs
Cost Avoidance• Avoid costs associated with bad
decisions by predicting costs in advance
• Compare results of alternate network decisions
© 2014 LLamasoft, Inc. All Rights Reserved
Forecasting: Current Design / Future Demand
S&OP/Capacity Planning• Identify where bottlenecks or
capacity limitations will be hit
• Determine where and when to add more manpower, pre-build product, or pre-position inventory
Sensitivity Analysis• Run multiple scenarios, varying
demand up or down to determine where and when operational changes are needed
© 2014 LLamasoft, Inc. All Rights Reserved
Innovation: Future Demand / Future Structure
Strategic Planning• M&A, new product launches,
new market entries carry heavy risk
• Test multiple potential scenarios to predict performance and mitigate risk
Gamification• Turn analysts loose to create
and test new supply chain designs
• Encourage innovation and entrepreneurship
© 2014 LLamasoft, Inc. All Rights Reserved
Putting ESP to Work: Case Examples
Quantification• Validation• Cost Avoidance
Innovation• Strategic Planning• Gamification
Baselining• Visualization• Communication
Forecasting• S&OP/Capacity
Planning• Sensitivity Analysis
Futu
reC
urre
nt
Current Future
Net
wor
k
Demand
© 2014 LLamasoft, Inc. All Rights Reserved
Case Example: Baselining
Using Simulation for Railcar Fleet Sizing
Challenge:Company needed to understand its current railcar utilization and quantity required to support alternate future scenarios
Solution:Baseline simulation model was validated and then alternate scenarios created
Results:Model provided visual, data-driven look at utilization, movements, service levels and costs. Numerous new scenarios showed the team what their fleet would need to look like under a variety of future assumptions
© 2014 LLamasoft, Inc. All Rights Reserved
Case Example: Quantification
Challenge:
Solution:
Results:
Using Simulation to Smooth Production Planning & Order Variance
Ordering and scheduling instability caused inefficient machine usage and poor plant utilization
Company used simulation to test a new segmentation strategy prior to making network changes
Simulation showed these strategies could result in a 40% improvement in stock levels and dramatic improvements in work center change-overs
© 2014 LLamasoft, Inc. All Rights Reserved
Case Example: Forecasting
Challenge:
Solution:
Results:
Using Simulation to Support S&OP
Company wanted to test potential network and sourcing decisions
Simulation was used to introduce business logic and lead time and demand variability to quantify how susceptible potential production plans were to unexpected changes
Simulation results showed the actual predicted on-time rate for customer orders, work center utilization and lost sales caused by raw material delays and production plan deviations
© 2014 LLamasoft, Inc. All Rights Reserved
Case Example: Innovation
Challenge:
Solution:
Results:
Using Simulation to Test 100 Network Improvements
Company needed to test the effects of different sourcing decisions
An SKU- and order-level simulationmodel enabled company to prove out the effectiveness of nearly 100 network improvement ideas
The retailer is now able to evaluate detailed service, transportation cost and inventory metrics for different network configurations before implementing in the real world
© 2014 LLamasoft, Inc. All Rights Reserved
Incorporating ESP into Supply Chain Design Platform
ESP ERP ROIEnterprise Simulation
PlanningEnterprise Resource
PlanningReturn on Investment
• Simulating new productionstrategies
• Playing ahead future demand• Experimenting with new routes• Running forecasted operational
tests
• Corporate master product data• Site and supplier locations and
lead times• Historical orders, shipments
and costs• Production capacities and
flows
• Rapid validation of new strategy decisions
• Early prediction of future capacity challenges
• Location of supply chain risk points
• Prevention of costly mistakes
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Wrap-Up
ESP provides a way to reduce risk and
encourage continuous supply chain
improvement and innovation
Part of an integrated supply chain design
process and technology platform
In use at many multi-national
businesses today
LLamasoft is the only supply chain design provider with integrated simulation engine
© 2014 LLamasoft, Inc. All Rights Reserved
Jeff MeterskyVP, Solutions StrategyLLamasoft, [email protected]
Thank you!