A Blueprint for Supply Chain Resiliency

Continuous Design Outsmarts Disruption:

How low-probability events can suddenly become reality

Respond More Quickly to Change

Fueled by digitization and global disruption, supply chains have changed

in recent years at a pace and intensity that many organizations have

never experienced. The need to source products from farther around the

globe and move them faster while delivering at lower cost has increased

complexity and risk while making it harder to manage and respond to

sudden disruption.

The COVID-19 pandemic, Suez Canal blockage, and Texas winter storms

causing a global plastics shortage are a few of the recent disruptions that

have now led supply chain leaders to realize that even low-probability

events can become a reality without warning and have a significant

impact on their operations. As a result, many organizations are rethinking

their agendas and making supply chain resiliency a critical component of

business continuity.

By adopting new technologies and the practice of continuous design,

organizations can reduce risk, improve resilience, and turn their supply

chain challenges into a competitive advantage. With new data sources, a

supply chain digital twin, and AI, companies can now test scenarios and

evaluate the impacts of their decisions before they execute them.

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https://www.coupa.com/products/supply-chain-design

A New Era of Disruption Supply chains have been hit hard with multiple crises and

disasters in recent years. From the dot-com bubble burst and

the 9/11 terror attacks to U.S.-China trade wars and COVID-19,

both global and regional events can have immediate and

significant impacts on the entire supply chain.

China’s entrance into the World Trade Organization in 2001

opened the world to a new level of globalism. Since then,

multinational corporations’ desire to capitalize on China’s

production prowess along with low-cost labor has shaken

up sourcing, manufacturing, and distribution models. The

movement of supply chains abroad helped drive global trade

from 39% to 58% of global GDP between 1990 and 2019. The

growth of e-commerce and AI has also put greater demands

on supply chains, forcing manufacturers and distributors

to source and move a wider assortment of products in a

shorter period, just as supply chains became longer due to

globalization.

While acclimating to the complexities of globalization and

the demands of faster fulfillment, supply chains have also

been pressured by the C-suite and corporate bottom lines to

become increasingly lean, efficient, and just-in-time.

Just as many organizations began adapting to this

new reality, the pandemic of 2020 started to unravel

globalization and accelerate the shift back to more regional

supply chains. Even before 2020, many organizations took

the U.S.-China trade wars as a cue to start diversifying out

of China and into other parts of the globe. The latest trend,

“glocalization,” aims to balance the tradeoffs between

efficiency and resilience in global supply chains by looking

to a more distributed network with redundancies and less

dependency on globally dominant hubs.1

1 How to build more secure, resilient, next-gen U.S. supply chains, Brookings Institute, December 3, 2020

The latest trend, “glocalization,” aims

to balance the tradeoffs between

efficiency and resilience in global

supply chains.

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https://www.brookings.edu/techstream/how-to-build-more-secure-resilient-next-gen-u-s-supply-chains/

Macro Shifts

External Disruptors

Globalization Rise of

e-commerce Cloud

Computing Rise of AI/ML Glocalization

2000 2001 2005 2005 2007 2008 2010 2011 2016 2018 2020

Dot-com Bubble Burst

9/11

Hurricane Katrina

iPhone Introduced

Global Financial

Crisis

Iceland Volcano Eruption

Prime 2-Day

Delivery

Brexit Referendum

Trade Wars

COVID-19

Japan Earthquake & Tsunami

Global Trade, Disruptive Technology, and Natural Events

Twenty Years of Supply Chain Disruption

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Traditional Planning Technologies Can’t Keep Pace The pandemic’s unprecedented disruption is a catalyst that may turn the tables for good in

making long, globally connected supply chains a liability. 94% of Fortune 1000 companies

experienced supply chain disruptions due to COVID-19, and three-quarters of companies

said they experienced negative business impacts.2

The pandemic revealed that most supply chains aren’t designed to manage the ripple effects

of disruptions in the global nature of supply chains. Many organizations struggle to design

a supply chain that is both resilient and efficient while addressing complex and nuanced

markets.

While organizations focus on cost efficiency, there is also growing acknowledgment that

it can often come at odds with resiliency, which requires the ability to respond by shifting

production, sourcing, or distribution quickly. Over 50% of organizations3 now say they have

a goal of making supply chains support enterprise agility. While less than 25% of industry

leaders say their supply chains are resilient, more than half believe they will become resilient

within the next two or three years. As of March 2020, a third of these survey respondents

said they had moved some sourcing or manufacturing out of China or planned to do so.

2 Supply Chain Disruption: Repurposed supply chains of the future must have resilient and responsibility at their heart, Accenture 3 55% of Supply Chains Expect to be Resilient in 2-3 years, Supply Chain Dive, June 26, 2020

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The pandemic revealed that most

supply chains aren’t designed

to manage the ripple effects of

disruptions inherent in global supply

chains. Many organizations struggle

to design a supply chain that is both

resilient and efficient while addressing

complex and nuanced markets.

https://www.coupa.com/blog/supply-chain/9-ways-improve-supply-chain-resiliency-response-executive-order-americas-supply https://www.accenture.com/us-en/insights/consulting/coronavirus-supply-chain-disruption https://www.supplychaindive.com/news/gartner-supply-chains-expect-resilient-within-2-3-years/580624/

There is an increasing acknowledgment that resiliency necessitates building optionality

in nodes, modes, and flows of the supply chain design. In this new environment, many

are looking for a new way to balance resiliency, cost-efficiency, and fulfilling increasing

customer demands.

Organizations now need a fast and data-driven means to determine risk exposure level,

consider substitutions, evaluate inventory, enhance network resilience, and create a

framework for more rapid, more intelligent decision making.

Old ways of planning driven by static assumptions

around supply chain design simply can’t keep pace.

COVID-19 exposed weaknesses in most supply chains

across industry verticals and revealed that most are

not designed for resilience.

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New Ways to Balance Resiliency and Intelligent Decision-Making Organizations have typically managed their supply chains with relatively stable networks,

policies, and modes of transportation. Still, this strategy no longer works in a world of such

uncertainty. Old ways of planning driven by static assumptions around supply chain design

simply can’t keep pace. COVID-19 exposed weaknesses in most supply chains across

industry verticals and revealed that most are not designed for resilience.

Most organizations now have C-suite alignment on the importance of resiliency. 87%

of supply chain professionals4 say they will invest in resiliency within the next two years.

Business leaders realize they must now have a clear understanding of disruption impacts,

potential consequences, and what tradeoffs they may need to make to restore operations

as soon as possible to ensure business continuity.

4 Gartner survey finds 87% of supply chain professionals plan to invest in resilience within the next two years, Gartner, February 10, 2021

https://get.coupa.com/HBR_Global-Supply-Chains_OnDemand.html?utm_source=Coupa&utm_medium=Interactive-Content&utm_campaign=IC-2021Q3&utm_trm=All-Supply-Chain&utm_content=20-Global-Supply-Chains-Post-Pandemic-World&utm_last_engagement=PG16209A1 https://www.gartner.com/en/newsroom/2021-02-10-gartner-survey-finds-87-of-supply-chain-professionals-plan-to-invest-in-resilience-within-the-next-2-years

Emerging Practice

Value Creation

Short-term, Continuous Design

Local, Regional Redundancy

Optimization Augmented by AI/ML

Interdisciplinary (Finance, Procurement,

Marketing, etc)

Continuous Design Outsmarts Disruption

Design is now moving beyond the practices of cost and efficiency focus towards value

creation, ongoing reviews, and multi-sourcing resiliency. While this may be a challenging

transition for many supply chain leaders, it’s also an opportunity. Market leadership is often

forged during times of disruption, and business leaders who drive successful supply chain

transformation can outmaneuver their peers during times like these. The best decisions

require the right balance of profitability, service, risk, and sustainability.

Supply chain design wherein nodes, modes, flows, and policies driving a supply chain are

reviewed and realigned to business objectives can no longer be viewed as an episodic,

project-based exercise. Continuous Design is the development and ongoing refinement

of optimal supply chain structures, policies, and flows. This is achieved through analysis,

scenario planning, and simulation with end-to-end digital models, fueled by AI and

powerful algorithmic engines.

Organizations must now prioritize adopting capabilities aligned to their business priorities

and eliminating functional and data silos, which are barriers to continuous design. By

doing so, they can create an environment for constant learning, planning, and execution

with the community of supply chain decision-makers.

Continuous design is the development

and ongoing refinement of optimal supply

chain structures, policies, and flows. This

is achieved through analysis, scenario

planning, and simulation with end-to-end

digital models, fueled by AI andpowerful

algorithmic engines.

Continuous design is the Key to Supply Chain Resilience and Agility

Traditional Practice

Cost Minimization

Long-term, Periodic Design

Global Efficiency

Optimization Driven

Supply Chain Centric

A New Way of Thinking:

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https://www.coupa.com/blog/supply-chain/are-you-ready-for-supply-chains-gdpr

The Building Blocks of Continuous Design More global companies are digitizing supply chains, and at least half will be

using AI, advanced analytics, and IoT in supply chain operations by 2023.5

By applying advanced algorithms, organizations can continually revisit and

adapt to make the best decisions balancing profitability, service, risk, and

sustainability.

Adopting a continuous design philosophy helps your organization

change with the times. While this requires commitment from the C-suite,

it also requires processes and technology. Continuous design calls for

components that can support a new generation of platforms to deploy

applications in a scalable manner and address niche situations and decisions

as they arise.

Fortunately, technology has come a long way in recent years, and it is

now much easier and faster to design on demand. With an end-to-end,

extensible data model, AI, and rich algorithms, supply chain leaders can use

simulation to quickly learn how to best respond to changing conditions.

They can also adjust scenarios and options in these models to identify

which decisions best support agility and resilience.

5 Gartner survey finds 87% of supply chain professionals plan to invest in resilience within the next two years, Gartner, February 10, 2021

The critical ingredients

of an end-to-end design

environment include:

A Decision Data Model to absorb data from internal and external resources, harmonize it, and then render the appropriate data model at an appropriate level of granularity to support the design decisions.

AI and Algorithms to provide the basis for simulation and optimization of each design decision required.

Personalized Experiences to deliver a tailored solution with the appropriate user experience for anyone in the organization to facilitate democratized, AI- powered decision making.

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https://www.gartner.com/en/newsroom/2021-02-10-gartner-survey-finds-87-of-supply-chain-professionals-plan-to-invest-in-resilience-within-the-next-2-years

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A visualization of the supply chain with nodes, modes, and flows

Models of the future powered by advanced algorithms

An open architecture

The ability to democratize decision intelligence to users through apps

The ability to augment data lake and planning investment

A Supply Chain Digital Twin Offers:

A Key Enabler of Continuous Design The Digital Twin:

While manufacturers have long used digital twins for product design and engineering to

reduce costs and optimize performance, this concept also applies to model changes in

the supply chain. Gartner refers to the digital supply chain twin as a digital, “dynamic, real-

time and time-phased representation of the various associations between the data objects

that ultimately make up how the physical supply chain operates.”6

As a digital replica of the physical supply chain, it offers an always-on reference model to

inform operational, tactical, and strategic plans, and to visualize all current state nodes,

flows, and policies. These models can be built from the current period to years in the

future to evaluate different decisions with complete tradeoff analysis.

The supply chain digital twin is a key component and enabler of continuous design. It

allows organizations to recreate their supply chain in the virtual world and quickly test

scenarios in a risk-free manner to learn how decisions will impact the network operations.

Just as fighter pilots cannot fly real planes until they go through flight simulators, supply

chain executives should not implement model changes in the supply chain without

testing them first through a design process powered by a digital twin. In these times of

rapid change and disruption, the imperative for supply chain agility and resiliency is more

important than ever. Disruption has always been a challenge to traditional, fixed mindsets

and supply chain planning measures. Leading organizations will need to embrace new

approaches and technologies.

6 The 2019 Top Supply Chain Technology Trends You Can’t Ignore, Gartner, March 11, 2019

https://get.coupa.com/21-Risk-Resiliency-SC-Modeling.html?utm_source=Coupa&utm_medium=Interactive-Content&utm_campaign=IC-2021Q3&utm_trm=All-Supply-Chain&utm_content=21-Risk-Resiliency-SC-Modeling&utm_last_engagement=PG16208A1 https://www.gartner.com/en/documents/3904266/the-2019-top-supply-chain-technology-trends-you-can-t-ig

The Digital Twin:

Generation 1 Prevailed until the 1990s, featured MRP as a planning

foundation and was powered by data standardization,

visibility, and a focus on efficiencies.

Generation 2 Integrated more functional optimization with

advanced planning systems, algorithms, and time-

phased visibility into the future, though confining

to organizational silos partly due to computational

limitations.

Generation 3 Featured connected, collaborative planning with

cross-functional inputs, and basic what-if scenario

planning.

Generation 4 Best suited for the “never normal” environment and

features AI-powered decision-making with intelligent

response and tailored solutions to drive timely,

financially optimal decisions. It coexists with previous

generation systems and augments the value created

by advanced scenario planning and simulations.

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A Key Enabler of Continuous Design Over the past few decades, supply chain decision-making systems have evolved from standardized to complex and intelligent AI-powered frameworks.

Supply Chain Decision- Making Framework

Continuous design powered by a digital twin enables smarter, faster supply chain decisions

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Learn how organizations leveraged continuous design and the supply chain digital twin to respond to disruption.

Continuous Design in Action

A global CPG company could no longer support its growing operations in China with rule-

based planning approaches that lacked scenario

planning. The company needed a means to

improve analysis turnaround times to identify up to

24-month capacity plans.

The company used an existing network model to

support strategic decision-making with bi-weekly

data updates and what-if analysis to regularly

determine the most optimal production plans.

Result: The company realized a significant reduction in logistics and production costs with a

substantial efficiency improvement.

A large American retailer immediately closed brick-and-mortar stores at the start of the

pandemic. However, inbound inventory continued to

overwhelm distribution centers which were nearing

capacity. The retailer applied continuous design

principles and technology to determine how to

move inventory to fulfill spike in e-commerce sales

due to stay-at-home orders. It adopted complex

inventory management rules which provided

recommendations, promotions, off-site storage

options, and liquidation of thousands of SKUs.

Result: The retailer could fulfill customer orders with agility and stay in business while competitors

closed for an extended period of time.

A commodities manufacturer traditionally leveraged episodic design technology to

position inventory ahead of the winter season until

erratic weather patterns led to an unbalanced supply.

The company developed a single, easy-to-use web-

based application powered by machine learning

that delivers weather-driven demand forecasts. This

enabled them to look at the network holistically and

reposition decisions to support week-to-week needs.

Result: Planners spend less time investigating sourcing options and make decisions for the entire

system based on weather-driven demand forecasts.

One of the most significant benefits of adopting

continuous supply chain design with platform

technology is that it enables organizations to

determine where to start and expand their focus.

Some organizations may begin with a foundational

network strategy then onboard additional use cases

to activate and scale them across the organization.

Continuous design and planning can support

many different priorities, such as network strategy,

more intelligent sourcing, optimizing production,

streamlining logistics, and customer-centric

fulfillment.

Adopt Supply Chain Capabilities Aligned to Your Business Priorities

Streamlined Logistics

Demand Predictions

Smarter Sourcing

Optimal Production

Cost to Serve Taxes & Duties Risk & Resiliency Sustainability & CO2 Network Strategy Greenfield Mergers & Acquisition CAPEX Planning

Segmentation Product Flow Shelf Life Optimization OTIF Performance Chargeback, Root Cause Analysis

Inventory Strategy Fulfilment Capacity Planning Fleet Sizing Transportation Mode Selection Freight Consolidation Vehicle Routing Reverse Logistics

Demand Modelling Market Sensing

Product Launch & Phase Out Demand – Supply Balancing

Sourcing Optimization Contract Negotiation & Compliance Supplier Performance Management

Supplier Risk Prediction Contingency Planning

Production Optimization Capacity Planning

Network Strategy

Customer- Centric

Fulfilment

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Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Adhoc Design Episodic Design Democratized Design

Synchronized Design & Planning

Dynamic Design

Individual initiatives with no clear organizational mandate

Reactive analysis after a major disruption

Offline, spreadsheet- driven analytics

Retrospective view of the supply chain

A design organization exists, but the outcomes of their efforts are not broadly democratized

Driven by requests from the organization with little scenario planning

Increased competence in optimization and AI, yet still largely offline

Some adoption of the recommendations, mostly offline

Democratization to the broader supply chain stakeholders with an executive

Proactive and dynamic processes with scenarios accessible online

Defined governance & standards with an end-to-end data model and technology

Some integration into planning & execution systems

Regular participation in design and planning from the business

Driving supply chain policies with dynamic node, mode, and flow decisions with value

Mature end-to-end digital twin in place

Executive decision- making based on design principles

External partners participating in the end-to-end design, collaborating on win-win opportunities

Closed loop with design changes triggered by deviation in KPIs

External value chain participation within the digital twin

Continuous design, fully integrating the strategic, tactical, and operational horizons

PEOPLE

PROCESS

TECHNOLOGY

STRATEGY

A Maturity Model to Progress to Continuous Design

The maturity progression for

organizations on a continuous design

journey is as follows. The model is

based on the focus areas of People,

Process, Technology, and Strategy.

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Organizations that embrace the vision of the

continuous supply chain design paradigm enjoy

outsized financial and operational benefits as

measured across a large number of engagements.

The minimum, average, and maximum value is

captured in the below diagram.

Revenue Increase

Value Delivered by Continuous Design

Improved Service

Cost Avoidance

Reduce Risk

Sourcing Cost Savings

Production Cost Savings

Inventory Cost Savings

Transportation Cost Savings

Fixed Operating Cost

Handling Cost Savings

Other Cost Savings

40%

35%

30%

25%

20%

15%

10%

5%

0%

Max Min Average

5%

2%

35%

12%

30%

10%

20%

9%

23%

8%

28%

10%

24%

10%

35%

10%

22%

9%

16%

6%

15%

8%

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The Future of Supply Chain Design

and Planning

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Adopt Continuous

Supply Chain Design and

Planning

Make More Automated and Faster Decisions

Complement Exisiting

Systems with AI and Outside-In

Data

Democratize Apps to the

Organization

Gain Proactive Insights from

a Supply Chain Digital Twin

Adopt Capabilities Aligned to

Your Business Priorites

There is clear evidence that companies that implement digital

technologies, fueled with new data sources to test, learn, and adapt

rapidly, can outpace their competitors. McKinsey notes resiliency7

isn’t just about dealing with the challenges and issues of the day;

it’s about using a culture of technology and digital tools that enable

them to be ready for the challenges that are yet to come.

Adapting through continuous design is the new competitive

advantage. By reducing functional and data silos, creating an

environment for constant learning, and using a supply chain digital

twin, organizations can move from episodic one-off design reviews

to a state of continuous design. When supply chains are designed

to adapt and evolve, organizations are prepared to make tradeoffs,

optimize policies, simulate situations, and accelerate the time

between making and executing decisions. This builds resiliency and

enables the supply chain to respond to whatever disruption is on the

horizon.

7 The Need for Resiliency, McKinsey, February 9, 2021

https://www.mckinsey.com/business-functions/operations/our-insights/the-need-for-resiliency?cid=soc-web

ABOUT COUPA

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Coupa empowers all businesses—from Fortune 1000 companies to the

world’s fastest-growing organizations—to unify their supply chain design

and planning, procurement, payments, and treasury processes in one

comprehensive, cloud-based Business Spend Management platform.

Coupa’s community of 2,000+ customers uses the platform to maximize

the value of more than $2.3T of spend to date.

For more information, visit coupa.com.

Smarter Together

http://coupa.com