Ask any executive how they would describe the COVID-19 pandemic’s impact on their work and nine times out of ten you’ll hear a variation of the word “unprecedented.”

And parts of it are unprecedented. The scale is unprecedented – at its height, the pandemic was affecting manufacturing not only in the U.S., but across the world. Its impact has been unprecedented, with impacts on both the supply and demand sides. The imbalance has been unprecedented, with sales of cleaning products, home improvement and home delivery booming, while restaurants, travel and hospitality have seen huge declines.

What has not been unprecedented is businesses being challenged by supply chain disruption. Anyone who has worked in supply chain management for at least a year knows that supply chains have always faced disruption, whether from natural disasters (which in 2020 included forest fires in the western U.S. and an Atlantic hurricane season that generated a record 30 named storms); labor unrest (which this year has included threats of strikes by truckers and Amazon warehouse workers); or political disputes (such as the ongoing U.S./Chinese trade war and the continued fallout from Brexit). While the specifics change, supply chains have always needed contingencies in place in order to function as smoothly as the disruptions would allow.

That said, while disruption isn’t new, the same cannot be said of its present scale and frequency. As recently as 20 years ago the Atlantic hurricane season produced half as many severe storms. International trade growth since the 2008 recession has spread supply chain operations to more countries than ever, creating more opportunities than ever for uncertainty. With greater uncertainty comes increased pressure to figure out what comes next. That’s where wargaming comes in.

The foundation of successful supply chain management

At its heart, supply chain management involves mediating between multiple silos including manufacturing, warehousing, transportation, and customer service so that they’re on the same page. Since each plays a critical role but has different needs, it’s common to have functional objectives clashing with overall supply chain objectives. Certain strategies might satisfy more parties but also cost more, while others save on budget but prove harder to implement, making it difficult to find a solution that makes everyone happy.

Though technology hasn’t made it easier to find common ground, it has made it easier to quickly test multiple scenarios in order to identify the solution that can drive consensus even across competing objectives. And while the first instinct of many supply chain managers is to execute whichever solution they are best capable of doing, most would agree scenario testing – wargaming – is preferable.

Wargaming essentially involves acknowledging the likelihood of disruptive events and identifying out how to best respond when they break out. For example, it might once have been optimal to have a single distribution center serve the entire southeast. But with hurricanes more prevalent, it’s probably more prudent to incorporate two distribution centers into the network – making your supply chain more expensive, perhaps, but also more resilient, and less likely to be affected next time a hurricane hits the Gulf Coast. 

With the right enterprise analytics software in hand, business leaders can quickly adjust multiple elements of their proposed supply chain strategies, run them through simulations, and record the outcomes. In a nod to wargaming’s military roots, they should keep in mind that no plan lasts beyond first contact – once on the field, they still need to be prepared to respond to additional (hopefully smaller) unexpected events. But the more scenarios they have tested, the better equipped their teams will be to respond to unexpected challenges. The more resilient their supply chain designs are, the less severely they will be impacted by unexpected events. Supply chain managers should also take comfort in a significant advantage they have over their military counterparts – they don’t have an enemy that is actively engaged in derailing their plans (even though sometimes it feels like that within an organization … but that’s a whole different problem).

No data? No problem!

Wargaming also helps address a problem that prevents many companies from testing scenarios in the first place: Lack of data. Naturally, the better a company manages its data, the easier it will be to run scenarios. But even without comprehensive data to start, companies can begin by testing the best data they have and updating it based on the results.

If run correctly, a scenario can lead to new questions. Your team can identify the data points that matter and focus on them while ignoring the ones that don’t. If the questions that arise are related to transportation costs, your team can update the scenarios they’re testing to focus on transportation data. If everyone involved agrees the transportation data is sound but disagrees over manufacturing and warehousing, the team can focus on improving its warehousing and manufacturing data until all constituents and decision makers are comfortable with the decision being made. Good scenarios act as a guide to where businesses should focus their efforts when optimizing their supply chain, ultimately powering not only the team’s supply chain strategy, but their data collection process as well.

When it was prohibitively difficult to run scenarios, you would do everything in your power to ensure the data was as complete and the model as comprehensive as possible, so that when you ran the scenario nobody would question it. Unfortunately, some questions have always remained as data and models are never perfect. Fortunately, the latest software makes running scenarios easier, and cloud computing is allowing us to run scenarios at previously unimaginable scale. By incorporating large scale scenario analysis – i.e wargaming – into their plannig processes, businesses can design more resilient supply chains and respond to uncertainty with greater confidence.