Use Case: Responding to Supply Chain Disruptions
In this use case, we will examine how to quickly respond to a sudden supply chain disruption using Convect AI’s Integrated Business Planning (IBP) software. Using the same beverage company example from the previous article, we will explore how to adjust production and distribution plans in minutes when faced with a shortage of a critical ingredient.
Scenario: Supply Disruption for Ingredient A
Spring Water production requires Ingredient A. However, due to unexpected supply issues (e.g., port delays, supplier unavailability), the replenishment of Ingredient A is suddenly disrupted. The company must now rely on the current inventory of Ingredient A to satisfy customer demand as much as possible.
Using Convect AI’s IBP software, we will show how to adjust the plan to handle this disruption quickly and efficiently.
Step 1: Create a Base Plan
To begin, follow the steps outlined in the previous article to download the data file and create a base plan. This base plan represents the situation where Ingredient A can be replenished as needed, and production is carried out normally.
Step 2: Clone the Base Plan
Once the base plan is created, we’ll create a copy to simulate the scenario where Ingredient A is no longer available for purchase.
- Navigate to the Workbench in the IBP app.
- Check the checkbox in front of the base plan.
- Click the three-dot icon in the top-right corner of the file list.
- Select Copy from the dropdown menu.
- Wait for the data clone process to complete.
Step 3: Adjust the New Plan for Supply Disruption
In the copied file, we will now adjust the inputs to reflect the supply disruption.
- Go to the Input View and navigate to the Products table.
- Find the row for Ingredient A.
- Change the value of Allow New Purchase from TRUE to FALSE. This tells the system that no additional supply of Ingredient A will be available during the production period.
Step 4: Adjust Demand Priorities
Let’s assume that not all markets are equal in terms of urgency. Distributors in Birmingham, Bakersfield, and Raleigh urgently need the product. To reflect this, we will adjust their demand priority.
- Go to the Demand Plan sheet.
- Change the Priority value for Birmingham, Bakersfield, and Raleigh from 9 to 1. This ensures that their demand will be given the highest priority.
Step 5: Update and Solve
Once these changes are made:
- Click the Update Data button to save your changes.
- Click the Solve button to start optimizing the new plan. This process may take a few minutes to complete.
Step 6: Review the Results
Once the optimization is complete, go to the Output View and Graph View to review the results.
- As expected, the demand fulfillment rate has dropped from 100%, reflecting the supply disruption.
- Interestingly, the fulfillment rate for the high-priority markets (Birmingham, Bakersfield, and Raleigh) remains at 100%. For all other markets, the fulfillment rate drops to 87%.
Why Did This Happen?
The reason for this is the optimization algorithm’s built-in fair share mechanism. The algorithm first ensures that high-priority markets are fully satisfied, and then distributes the remaining inventory equally among lower-priority markets. As a result, while the overall fulfillment rate drops, the most critical markets continue to receive their full allocation.
Conclusion
In just a few minutes, we were able to create a new plan to respond to the sudden supply disruption using Convect AI’s IBP software. The system quickly recalculated the production and distribution plans, adjusting to the shortage of raw materials while ensuring that high-priority markets received the product they needed.
Convect AI’s IBP software can also handle other types of disruptions, such as production facility shutdowns or transportation route closures, allowing companies to respond swiftly and maintain smooth operations during times of crisis.