The ability to make strategic, tactical, and operational supply chain decisions in the digital ecosystem is and will continue to be a critical part of decision-making for supply chain leaders.
Executives at leading industrial materials companies—including wood products, mining, cement, steel, and machinery manufacturers—are answering strategic questions about infrastructure needs, Mergers and Acquisitions (M&A), and capacity planning. Some also focus on the tactical level decisions, i.e., their current reality. They ask, “are we losing market share because we don’t have the right products?” “Which products contribute most to the margin?” “How can we improve customer lead time?” At the same time, those executives must systematically analyze how all their company’s operations work together. Decisions must be made that span the entire value chain.
And they are finding that those decisions must always include the financial impact. How can industrial materials companies address all financial complexities, constraints, and KPIs and ultimately increase value? And this is all under the umbrella of balancing complex trade-offs and maximizing the value of every decision.
The growing complexity of global industrial supply chains exponentially increases their challenges. The frequency of supply chain disruptions is on the rise, including labor shortages, excess inventory, and transportation delays.
But the most resilient supply chain companies are beginning to meet those challenges – and then some. River Logic is enabling this business transformation by using new technologies like digital twins and digital planning twins.
A Digital Planning Twin represents how a business delivers products and services, including demand, customer terms, the value chain, revenue, cost, and financial statements. It then applies optimization to recommend the best decisions, subject to specified restrictions and objectives.
Industrial materials companies already utilizing River Logic’s digital planning twin approach have a head start against their competition. Some have made the decision to shorten their supply chains by sourcing from local suppliers, moving out of China in favor of North America, Europe, and other parts of Asia to keep production lines moving, despite higher costs. Others are diversifying their supplier bases and expanding capacity closer to operational hubs to increase on time deliveries and customer satisfaction.
For organizations that understand their supply chain weaknesses, there is an opportunity to prepare for future challenges and a chance to build resilience without hurting efficiency. And to do this successfully those organizations need to be able to extrapolate the differences between the supply chain and the value chain. With a digital planning twin all decisions are by design quantifiable!
To remain competitive, industrial material leaders need to focus on some key priorities:
- Redefining their supply chain strategies, looking at global product flows, tax impacts, and the network footprint while implementing supply chain architecture that can manage new risks and opportunities.
- Creating and reinforcing agility in the supply chain footprint and supplier network while improving responsiveness through scenario planning using innovative digital twin and digital planning twin technology.
- Optimizing working capital profile. By leveraging analytics and automation, they can use digital transformation and supply chain reinvention as an opportunity to drive significant change in working capital.
- Paying heed to corporate responsibility and sustainability, helping CFOs and CEOs drive competitive advantage and positive environmental outcomes, especially critical in the industrial materials space.
- And, as an adjunct to the above, implement supply chain technologies that enable new revenue streams – rather than focusing solely on industrial efficiencies.
Just as important, industrial materials companies, by their very nature, are frequently impacted by external issues, such as when a developing country builds many dams and power plants that greatly increases the demand for cement and steel over time. Economic factors, such as interest rates, impact the housing marketplace and the demand for lumber.
Supply chain evolution will take several decades to unfold in the industrial materials industries. Hand in hand with that evolution—or a byproduct—is the digital transformation that has influenced, and sometimes exploded, the legacy existing supply chain models worldwide.
And given the pointed and massive impact of additional external forces, like the pandemic, environmental concerns, and warfare situations, industrial materials companies must realize that change is inevitable. And the most resilient will succeed.
Download our brand-new point of view document: Optimizing Decisions for Real Results at INDUSTRIAL MATERIALS COMPANIES.
Author:
VP Product Management at River Logic
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