The Power Of Planning With Simulation

Antoin Linssen

A conversation between Massimo Mercuri (AkzoNobel) and Anthony Bordin (SAP). 

In July, Europe was dealing with a CO2 gas shortage. Right in the middle of summer, that started with a tensive World Cup soccer, the shortage affected the production of soft drinks, beer, and even English Crumpets.

The reason? No fewer than five major CO2 producers in Northern Europe were offline for seasonal maintenance. This seems like a fairly preventable crisis. Anthony Bordin, digital transformation and industry value specialist at SAP, and Massimo Mercuri, director of the Center of Expertise (CoE) for Digital Innovation and Strategy at AkzoNobel, sat down to discuss the importance of integrated business planning.

Preventable shortage?

Events as predictable as the World Cup, or summer, for that matter, can and should be incorporated into any supply or maintenance planning. When unexpected things like (seasonal) maintenance complicate the planning, companies should have an alternative scenario ready to prevent any upheaval.

“This CO2 shortage demonstrates it is crucial for sales operatives, the finance department, operations and direct procurement to have good supplier relationships,” Anthony explains. “The key to achieving that is to know well in advance what you need and when you need it, properly communicate your production planning, and manage your suppliers’ expectations. This allows you to adapt to changing situations and build a reliable network of suppliers to prevent such crises. Integrated business planning, in combination with a large business network that links your company with your suppliers, is the way to realize all of this.”

Data is crucial, just not all data

“I don’t want to use a cliché,” Massimo adds, “but if you don’t measure things, you can’t manage them. Therefore, having data is crucial. Unfortunately, most people interpret this as meaning they need all possible data.”

“For instance: when it comes to warehouse management, you simply need to know what comes in and what goes out. Once you know that,” Massimo continues, “you can start analyzing data and gradually optimize the process. Add temperature sensors when you deal with fresh food, for example, so you can guarantee the quality of your products. This adds value because it is based on a key element of your business.”

Anthony advises, “Data by itself is not very valuable, it’s not information. So, it is important to define your strategy: are you trying to go for market growth in a particular country, are you trying to change your profitability, or just making sure you stay ahead of the curve? Whatever your strategy may be, you need to find the right data to help you move towards achieving that goal.”

Manage by exception

“So, the key is knowing what data you need, and why it is important,” Anthony reflects. “It can therefore be hugely valuable when you run what-if scenarios around changing volume, price, and resources. Imagine the insights you gain from these simulations and management by exception in general. More importantly: these insights allow you to immediately take the right action.”

Massimo continues Anthony’s thought: “Scenario simulations are very powerful. At AkzoNobel, we aim to let new employees play the Business Game. Based on real data, this game can become a powerful training platform. But you need good computing power to do simulations. Their value is not in knowing what the right thing to do is. There are many right things. You need to understand what the wrong things are and then stop doing those.”

“When you have that knowledge,” Anthony adds, “you have a goal to work towards and you can greatly increase your return on sales.”

Genetic innovation

Massimo uses the example of Amazon to show how, by doing simulations, you can shift or expand your business. This is called genetic innovation. “Amazon started out selling books online,” Massimo says. “In fact, their core business was doing online transactions. Once they realized that, they saw they could sell anything online. However, their business planning simulation revealed that this could create a problem: there was a big risk they would spread too thin and feared they would lose the power of the brand.”

“So, they reevaluated and said: we stick with selling books, but we open up our platform for other online companies to use our capability for doing transactions. Next, they realized they could open the cloud power they had, including all the technological tools, and allow anybody to use it as they wanted. It was no longer limited to web shops. Those are powerful transformations, which resulted in a completely new stream of revenue for Amazon.”

Move to the customer

“We need to talk about the customer,” says Massimo. “They should be at the center of your business as value is generated by the willingness of your customer to buy your product. This means you have to make it easier for you as a customer to get your product.”

Anthony adds, “Understanding what is important for a customer is, therefore, a big element in integrated business planning. Where are your customers, what is their behavior, what do they buy? These should be focus points of your planning.”

“I would like to take it even further,” Massimo adds, “and work together with the customer so you can see what brings value to them. Perhaps that’s not even your own product. At AkzoNobel, we are looking at business models where we sell information and advice. Similar to how Philips offers light as a service. We tap into the knowledge that already exists within our company. Using the brain of our employees as well as the customer.”

Massimo continues: “Let me give an example. Data can, for instance, show the corrosion level at a certain site – which we can track with GPS. We provide the customer with advice on when to do maintenance or what type of coating they need for better performance.”

“Knowledge is power, that much is clear,” Anthony concludes. “But simply gathering data is not enough. First, you need to know what to do with it. And keep in mind to focus only on the information you need. Next, it is crucial to figure out what you want or need to do with that information. With integrated business planning you go from gathering data, via analyzing it, to an actionable process. This way you help make the world a better place by making CO2 shortages due to seasonal maintenance a thing of the past!”

massimo mercuri director of the Center of Expertise (CoE) for Digital Innovation and Strategy at AkzoNobelMassimo Mercuri is director of the Center of Expertise (CoE) for Digital Innovation and Strategy at AkzoNobel. Coming from a multinational family, Massimo has lived in several countries and worked in a variety of different industries. That made him a natural catalyst and connector of brains, who likes to make ideas come true. His professional trajectory spans over twenty-five years of experience in computer science, engineering, new product development, operations and innovation.

anthony bordin digital transformation and industry value specialist at SAPAnthony Bordin is a digital transformation and industry value specialist at SAP. He works with utilities, steel & chemical companies to transform their businesses and be ready for the new era. Taking inspiration from other industries, peers and trends, Anthony’s passion is to build or articulate existing strategies into actionable outcomes that serve all shareholders including society. Although originally from Australia, The Netherlands is where he now calls home.

Learn more about SAP’s view on the digital supply chain.

Antoin Linssen

About Antoin Linssen

Antoin Linssen is a marketing programs manager at SAP in the Netherlands. In this role, he helps SAP customers see – through marketing awareness efforts – how digital transformation can help run a better business.