A few years back, Gartner and other industry groups started talking about the “digitization” of supply chains. The imperatives were laid out – in order to thrive in the new world of global commerce. In 2016, Sourcing Journal published a story about Li & Fung's technology initiatives with the headline "For Supply Chains, It’s Digitize or Die," and I wonder how many retailers died because they didn't or couldn't get the digital transformation right.
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| Digitization makes it possible to share, process and analyze information. |
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I often catch myself saying that the use of Excel spreadsheets is not truly a “digital” tool even though it is software and technically digital. But not under the new definition. Non-digital supply chains are managed with the information contained within paper, email, phone calls and Excel spreadsheets. This is data that is replicated, distributed and unstructured. It cannot be processed by software. On the contrary, the digital supply chain consists of data that is robust, normalized, structured and centralized in a consolidated platform. This data can be processed by software! It enables one version of the truth for the entire global supply chain.
Digitization makes it possible to share, process and analyze information. A digital model of the supply chain forms the ability to quickly and easily adapt to the real world. Digitizing supply chain planning and execution processes can be more closely aligned to business policies and objectives – unlike traditional methods of outsourcing processes and managing disparate systems. Best-in-class companies have then challenged the conventional thinking of the supply chain as being a cost of doing business to finding valuable opportunities in each phase of the lifecycle.
Now that organizations have digested the digitization message, and many have started their transformation, we have a digital twin that has entered the picture. Yet another technology moniker that bewilders first-timers and certainly suffices an explanation.
What is a Digital Twin?
The concept of the digital twin arose in 2002. Quite simply, a digital twin is a virtual model of a process, people, product and service. This pairing of the virtual and physical worlds harvests data from various sources and systems and analyzes that data to head off problems before they even occur and make proactive decisions. As a bridge between the physical and digital worlds, the twin is key to the digitization of supply chains. However, it is dependent on good data coming in.
What Can You Pair With a Digital Twin?
When your supply chain data and parties are sharing digitized data, you create a digital model that represents a copy of the real world. Gartner defines a digital twin as "a software design pattern that represents a physical object of understanding the asset's state, responds to changes, improving business operations and adding value." Think of it as a digital doppelganger of the real world. Unlike the physical world, it is possible to manipulate, process and analyze the digital version with computer software. This unlocks tremendous value through improved collaboration, automation and analytics, as well as creating a flexible and adaptable operating platform.
- Digital twins need a network to interconnect underlying systems and create a real-time digital representation of the end-to-end physical supply chain (from the shelf to n-tiers of supply). This “digital twin” of the supply chain is updated in real-time or at whatever cadence is required for the business processes being orchestrated. To this end, only some supply chain software providers have built out their network to create a direct materials multi-enterprise supply chain business network that serves a wide range of industries. This network platform then powers the functional supply chain management applications, enabling end-to-end planning, execution, visibility, collaboration and optimization in a way that was not previously possible with siloed point solutions or on-premise ERP solutions.
- In their “Leading Technology Trends and Initiatives From the 2019 Supply Chain Top 25” survey and report, Gartner analysts Brock Johns and Christian Tietze promote the benefits of digital twin technology in supply chains. "Organizations would use a digital supply chain twin for all levels of supply chain decision-making, from strategic through to execution." The report goes on to say that digital data can be utilized by machine learning and artificial intelligence tools to power the supply chain further than previously realized.
- Internet of Things (IoT) devices are still on the increase as a supply chain innovation, but digital twins are an ideal technology to improve the value of IoT data. Data collected from IoT devices and shared via the digital twin can monitor factory product milestones, container temperatures, truck movements and more.
The Digital Twin’s Control Tower
The type of data available through a digital twin isn’t just fun to look at – it shines a light into the dark corners of the supply chain. The digital twin creates a control tower that provides a means to create efficiency and unlock real value in a variety of ways.
A digital control tower enables collaboration with internal systems and external ecosystems, which creates opportunities for workforce efficiency, as well as improvements in supply chain speed and quality. Information is sent to and from the right parties and systems as fast as the internet allows, eliminating the need to re-key the data, which results in acceleration, reduced work and the eradication of costly errors.
A digital control tower performs automation, which can reduce manual work and third-party costs. Whether through the determination of a product’s eligibility for a trade agreement or the creation of a digital version of the customs entry, automation eliminates costs.
By creating a digital version of the real supply chain, including the historical record, data analytics can be used to identify new savings opportunities. Hard dollar savings in areas such as sourcing, duty/tax, and transportation can be found, while identification of process bottlenecks will result in continuous improvement.
“Where’s my stuff?” are words that we now have a credible answer to, but even better, we can leverage the digital twin of our supply chains to SEE, UNDERSTAND and ACT. You can anticipate delays and react quickly to avoid costly resolutions, optimize inventory levels by correlating and prioritizing late shipments, use AI and machine learning to understand the impact on inventory or revenue and take action with integrated functionality for downstream transportation changes.
Conclusion
There are many famous twins, Ann Landers and Abigail Van Buren, The Bobbsey Twins, Tweedledee and Tweedledum, and others. But none have the power and potential of the digital twin. The data, the network, the ecosystems and other technology converge and deliver greater value. As your supply chain makes the digital transformation, be sure to take your digital twin along.
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