Can simulation benefit supply chain organizations?

Filed in archive Point of view on June 6, 2007

I recently read an article by Dan Gilmore of SC Digest on "Supply Chain Optimization versus Simulation" which was quite interesting to read. simulation techniques have become popular in the recent years in addition to optimization softwares and Dan believes that Optimization and simulation can be used together, as is increasingly common in supply chain network design. This way companies can achieve better ability to understand the impact of dynamic events, better total system understanding, and (increasingly important today) risk mitigation and all these at a reasonable optimal cost.

Kinaxis on Response Management has provided a nice review of the article. Specifically I liked the following part in the article:

In my mind, they are simply two approaches suited for two different problems. Years ago the focus of all supply chains was efficiency and trying to run things like clockwork. Process automation and removing people from the process were key objectives. Today, managing volatility and change is critical to success, so the more urgent need has become how to respond, and that requires human judgment. So, where optimization can be used when assumptions are known and stable, simulation that supports human judgment is required when there is frequent change requiring rapid scenario analysis to determine the right course corrections to make.

What do you think? Should supply chain practitioners and execs get knowledgeable in such areas? How important is the role of simulation packages in order to mitigate supply chain risk?