Every year there is a new technology solution that is set to transform how supply chains operate; whether it be blockchain, internet of things (IoT), or RFID. But with the introduction of new technology it can often be difficult to see past the hype and really understand what a new technology can actually deliver, and how - or even if - it can benefit your supply chain.
Very often academic articles or thought-leadership pieces, much like this one, claim this latest innovation will revolutionise Supply Chains. But the benefits can be unclear and the investment costs high.
Digital Twin Supply Chain is the latest of these technology-enabled solutions – but is it worth the hype?
This article will explain that the benefits of Digital Twin Supply Chain are easy to understand and, in later piece, that supply chains of all sizes can implement it without big investments in time or money.
What is a digital twin?
Before exploring the benefits to supplies chains, we need to understand what a “Digital Twin Supply Chain” is.
Digital Twin’s origins go back to discrete manufacturing where a virtual representation of each individual product and asset would be created to allow monitoring throughout the production process.
Within a supply chain, the digital twin is end-to-end. A virtual representation of your entire supply chain, from your suppliers to your customers.
A true digital twin connects all nodes of your end-to-end supply chain, including suppliers, freight, distribution centres, stores, and factories, and it should include your costs, inventory levels, respective capacities, and emissions. This creates a digital twin of your physical supply chain.
A digital twin of your supply chain is not simply a model, no matter how complex the model. At their core, traditional supply chain models use a static dataset and then apply calculations to analyse various scenarios. For example, a model may take the previous 2 years of sales data and apply a growth forecast to predict where capacity constraints may occur in the future. A digital twin is not just a one-off ad-hoc analysis of your supply chain.
Where a model, or an ad-hoc analysis of your supply chain would provide insights, it requires the collection, addition, and extraction of data. A digital twin enables you to run powerful and insightful analysis on a regular basis, without needing to collect and extract data each time.
By connecting to your existing systems, a digital twin has the ability to both constantly analyse past performance and model future scenarios based on current and forecast data.
What are the benefits of a supply chain digital twin?
The true advantage of having a digital twin of your supply chain is being able to conduct powerful analysis on a regular basis, seeing the results in real-time, and then being able to enact changes to your supply chain based on the latest data - all of which can be automated. There are 3 key digital twin supply chain benefits, which enable you to:
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Understand and reduce cost
A Supply Chain Digital Twin enables existing supply chain analysis to be enhanced even further.
For example, a comprehensive Cost-to-Serve® analysis would take your business’s data and provide costs at a sub-process level, allowing you to aggregate back up to see your true profitability by product or customer. However, firstly, by allowing you to conduct this analysis quickly and easily on a regular basis using your latest data, as your business changes, as you add customers, or change product mix, you always have the latest understanding of cost and profitability.
Secondly, a digital twin also enables you to model potential changes to your business so you can see what impact they would have on product and customer profitability. A digital twin will then enable you to track these changes and see the financial impact your decisions have had.
Finally, end-to-end visibility of costs and the ability to model scenarios, will ensure any cost initiatives actually reduce costs to the end customer.
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Understand and reduce carbon emissions
Businesses are increasingly under pressure from both their customers and regulators to report and reduce carbon emissions.
In a similar way to financial cost, each process within your supply chain has a carbon emissions cost associated with it. A Supply Chain Digital Twin allows your business to fully understand and report carbon emissions at a product and customer level.
Once the emissions are visualised, a digital twin can provide you the insight, suggested actions, and modelling capability to positively change your business’s carbon emissions.
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Identify, model, and mitigate risk
The final benefit of a supply chain digital twin is it allows you to model and mitigate supply chain risk.
Although high impact threats to supply chain like COVID-19 take the headlines, supply chains face risks every day. From strikes and political unrest to shipping disruption caused by bad weather, businesses need to understand the impact these events can have on their supply chains.
A Digital Twin can analyse internal and external data and identify where bottlenecks or capacity constraints may occur with your supply chain. This will allow you to model scenarios using real data to help you mitigate disruption to your supply chain and ultimately to your customers.
Far from being pure hype, digital twins are set to offer the next level of analytical insight for supply chains, allowing for a level of analysis, and the benefits associated with this, previously not possible. Unlike many other supply chain innovations, Digital Twin Supply Chain can allow you to realise benefits by taking existing data and systems with only a relatively small investment – a topic that will be explored in part 2 of this piece
