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SUPPLY CHAIN MANAGEMENT Digitalisation of supply chains - Achieving resilience & sustainability

Jan 8, 2021

Business resilience, as a fundament for uninterrupted & focused business, has gained prominence. This renewed focus has also highlighted the importance of a technology sound & sustainable infrastructure. In this Cover Story, Aspen Technology – a company that is embedding AI throughout industrial manufacturing environments for largest oil & gas, chemical and engineering companies and helping them achieve their goals in safety, sustainability, and operational performance – offers insight on the digitally-enabled prospects companies can embark on for resilient supply chains and meet sustainable targets. - Roch Gauthier, Senior Product Management Director, Aspen Technology & Dr Paige Marie Morse, Industry Marketing Director, Aspen Technology

Resilience is a common topic in business discussions these days as we all learn how to navigate during this unexpected pandemic. What began as a health crisis has quickly evolved into an economic one with the resolution of both still looking relatively uncertain. The extreme volatility that accompanies both crises challenges business to meet variable demand and manage disrupted supply chains. At the same time, a renewed focus on sustainability has emerged in many chemical companies. Many feared this focus towards the long-term business impact on local communities and the environment, particularly the climate, may have been lost during this crisis. This focus has renewed strength as companies set new targets to reduce energy use & emissions and governments include green energy policies in economic recovery packages.

Shareholders and investors are paying attention. For many organisations, the lesson from the recent months is that sustainability and resilience are two sides of the same coin, mentioned the private investment group Generation Investment Management in its Sustainability Trends Report 2020 published this summer. The pandemic has accelerated many sustainability trends worldwide, such as remote working and telehealth. Digital technologies are at the centre of this activity, enabling greater efficiencies, collaboration and new capabilities that can form the basis for business growth. We will review the key digitally-enabled opportunities for companies: resilient supply chains and meeting sustainability targets.

Resilient supply chains

In a recent report titled ‘Beyond COVID-19: Supply chain resilience holds key to recovery’, Baker McKenzie and Oxford Economics cited that the pandemic has resulted in an unprecedented global supply chain crisis. Forecasting global recovery as early as H1 2021 in the hardest-hit manufacturing sectors, the firm alluded to the digitalisation of supply chains as strategic for businesses to achieve resilience and sustainability.

On this road to recovery, it is essential that businesses continue to stay ahead of the curve. In recent months, we have conversed with supply chain professionals in the process manufacturing industry to learn how their organisations were adapting and achieving business continuity by leveraging digital twins.

Keep plant operations personnel safe: The priority at the onset of the pandemic was to keep employees safe. We learned about a North American company that rapidly incorporated social distancing constraints into their production planning & scheduling digital twins in order to help keep their manufacturing operations personnel safe. While generating optimal manufacturing plans & schedules, the digital twin technology ensures that operations personnel are working in a section of the production facility with adequate physical distancing to keep people safe while simultaneously considering complex manufacturing equipment constraints related to using alternating lines/equipment on various days of the week.

Gain insights into the financial & operational implications of business scenarios: The other priority was to protect the financial health of the business. Many organisations mobilised a team responsible for evaluating the financial & operational implications of numerous short- to mid-term business scenarios. We learned that a European company had been using their end-to-end supply chain planning optimisation digital twin to run & analyse a significant number of scenarios every day immediately at the onset of the pandemic. Their digital twin allows them to easily change time-period-specific data assumptions related to supply and demand conditions spanning their global supply chain. Since their digital twin makes use of holistic mathematical optimisation methods, they were able to rapidly develop a portfolio of supply chain ‘game plans’ on how to best respond to circumstances as the future unfolds. The big takeaway is that supply/demand scenarios analysis has rocketed in importance in process manufacturing industries since the beginning of the pandemic.

Keep work from home and on-site teams aligned constantly: Maintaining business continuity and safe reliable supply chain & manufacturing operations became much more challenging when some of the people who usually work at the manufacturing sites were directed to work from home. This included schedulers, material planners, engineers, supply chain planners, shipping coordinators to name but a few. We learnt a wonderful story about an Asian production site that is using a digital twin that helps their supply chain & manufacturing operations teams stay aligned and on the same page throughout the day. The technology allows them to interact with a live web-based view of the latest published schedule, view projected inventory positions, identify problems ahead of time and helps everyone maintain situational awareness about what is happening at the manufacturing facility and working towards a common goal.

Quickly adjust to keep demands, capacity, supply & operations execution in synchronisation: We learnt of a company that produces some materials that have been in higher demand in the past months that leverages a scheduling optimisation digital twin, which helps them to align demands, capacity, supply & operations execution team members daily. The digital twin allows them to adjust to changing conditions and helps them improve cash flow, ensure on-time shipping performance & flex production output.

Monitor demand for signs of recovery & hopefully rebound: Since the beginning of the pandemic, most companies that we have spoken to are reporting that the accuracy of their demand forecasts is considerably less than before. Forecasting digital twins were never designed to handle the profound & fundamental changes that have occurred in consumer behaviour and upstream business demand patterns as a result of the pandemic. There is a good article that was published recently in the MIT Technology Review on this topic entitled ‘Our weird behaviour during the pandemic is messing with AI models’. In preparing for recovery, some companies are using digital twins to help them closely monitor changes in demand trends week-over-week as part of their weekly Sales & Operations Execution (S&OE) meetings.

Redesigning supply chain & manufacturing to be more resilient: The pandemic has exposed the vulnerabilities in today’s global supply chains that were designed for efficiency. There is an opportunity for manufacturers to (re)design their businesses to make them more resilient. This will involve analysing and building redundancies for critical product lines and associated production and supply capabilities, including reviewing existing suppliers & locations, substitution options as well as existing manufacturing locations and the current flexibility of manufacturing resources. This is an area where an end-to-end supply chain optimisation digital twin can be leveraged to explore and analyse various supply chain and manufacturing (re)design alternatives to build more resilient businesses.

Strengthen ones supply chain with self-healing capabilities: Digital supply chain planning and scheduling twins are often used to make customer order promises and commitments. There are significant risks to customer service levels and On-Time In-Full (OTIF) KPIs if digital twins get out of sync with reality. Self-healing supply chain capabilities ensure that supply chain digital twins remain as accurate as possible, reflecting demonstrated plant, equipment and process performance. This is achieved by automatic detection of data inputs that may no longer be valid amongst the tens to hundreds of thousands of manufacturing data inputs (eg, processing times, yields, set-up times, cleanout times, transition times, etc) used by supply chain digital twins. Self-healing supply chain capabilities help identify these proverbial needles in the haystack with minimal time and talent input. Self-healing supply chain capabilities can also combine both predictive and prescriptive technology. For example, low-touch Machine Learning (ML) is used to predict with high degrees of certainty manufacturing equipment/asset failures weeks in advance. Prescriptive Mathematical Optimisation (MO) methods in supply chain planning and scheduling digital twins make use of these advance equipment failure warnings to answer the question of ‘when should we take planned downtime (in advance of the predicted failure event) to ensure minimal disruptions, costs and impact to customer order commitments and relationships?’

Supply chain digital twins are proving to be critical tools for many manufacturers in the process industries during these uncertain times, providing insight to adapt to this new operating environment.

Sustainability targets

Sustainability topics, including climate change, regulatory compliance, the circular economy and energy consumption are being raised in shareholder meetings, by large institutional investors and the media. The liabilities associated with environmental damage — actual or perceived — can have a very real negative effect on shareholder value, while also raising concern about reduced growth in some
end-use markets.

Digital solutions have been helping with sustainability goals for decades since many digitalisation efforts often targeted efficiency improvements. However, while energy consumption reduction is typically measured in dollars, industries are moving towards more specific metrics for resource use, process emissions and value chain optimisation that help define goals & engage employees.

Most advancements in digital transformation result in tangible benefits across the business. Processes that lead to reduced energy consumption can lead to more business profit. Capabilities (like knowledge automation) that promote better employee onboarding and more technical guidance will not only attract and keep talent but can also help curb unintended manual mistakes during production.

Indeed, the importance of linking sustainability concepts to employee engagement and success cannot be underestimated. At a recent industry event, Lyondell Basell, CEO, Bob Patel, highlighted this importance and noted, “Ten years ago, employees asked ‘how do I get ahead?’ Today a new employee asks, ‘how do I make a difference?’.”

Image Gallery

  • While energy consumption reduction is typically measured in dollars, industries are moving towards more specific metrics forresource use, process emissions and value chain optimisation that help define goals & engage employees

  • The extreme volatility that accompanies crises, challenges businesses to meet variable demand and manage disrupted supply chains

  • Digital technologies are enabling companies to increase the efficiency of their operations and more quickly develop solutions to solve the challenges of the circular economy

  • A plant’s digital twin capabilities give companies a comprehensive view of the energy use across a unit or enterprise, and new visualisation tools enable better analysis & reporting of the overall and discrete energy consumption

  • New dynamic modelling capabilities enable upgrades of existing flare and pressure safety valves, as they integrate current operations to create a more accurate model of operations

  • Dr Paige Marie Morse

    Industry Marketing Director

    Aspen Technology

  • Roch Gauthier

    Senior Product Management Director

    Aspen Technology

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