Preparing for what’s possible: scenario planning for resilient supply chain networks

The foundation of effective scenario planning lies in establishing specific, measurable objectives. While supply chains need to balance all these objectives, successful organizations prioritize two primary targets, such as:

• Cost efficiency
• Maximum service
• Environmental sustainability
• Resilience

This focus prevents analysis paralysis and ensures scenario development remains strategically relevant. 

Strategic scenarios must operate within realistic constraints that reflect actual business conditions. These limitations serve as strategic guardrails, narrowing the range of viable scenarios to what’s feasible. These typically include: 

• Regulatory restrictions: Export limitations, tariffs and compliance obligations  
• Fixed asset commitments: Long-term facility contracts, recent capital investments and production sites that cannot be easily relocated, as well as capacity and throughput limitations 
• Financial constraints: Budget limitations, shareholder expectations and required payback periods for network changes 
• Other restrictions: Sustainability targets, implementation deadlines and other ongoing factors that influence scenario feasibility 

Scenario development starts by mapping possibilities across key dimensions. To sharpen decisions, begin with extreme cases. They expose the real trade-offs and can even reveal upsides, like greater resilience alongside higher service levels. For instance: 

• An extreme cost optimization scenario would minimize total operational expenses through network consolidation and maximum efficiency.
• A scenario focused solely on service excellence would outline how to achieve maximum delivery speed and reliability, regardless of cost implications.
• A maximum resilience scenario would build redundancy and flexibility to withstand multiple simultaneous disruptions, no matter the cost. 

Sensitivity analysis tests the robustness of strategic decisions under varying assumptions.

For example, if scenario analysis indicates the benefits of establishing a distribution center in a specific market, the sensitivity analysis might evaluate the impact of demand fluctuations or competitive changes. This step determines how much the benefits might fluctuate, while confirming the strategic decision remains sound.

The final step involves analyzing each viable scenario and making strategic network decisions using key performance indicators. By comparing multiple scenarios, decision makers can identify opportunities to improve the network based on their strategic objectives such as:

• Total cost broken down into transportation, facilities, inventory and operational components
• Working capital requirements 
• Service level performance measured through delivery times and market coverage 
• Environmental impact like CO₂ emissions and sustainability metrics
• Resilience, evaluated through qualitative assessments such as disruption simulation and redundancy analysis