To compete in today’s fast changing marketplace, it is becoming increasingly important for companies to employ digital technology that can mirror business processes both internally and externally. Management of the modern-day supply chain requires a “digital twin” to detect threats, simulate possible outcomes, and model corrective actions.
As supply chains mature, they experience waves of change. They have evolved from siloed physical distribution management to experiential-based management relying on advanced simulation and optimisation. Digital convergence represents the latest wave in supply-chain maturity. It embraces orchestration and synchronisation, resulting in the creation of integrated enterprise supply networks.
In its recently published report, The 2019 Top Supply Chain Trends You Can’t Ignore, Gartner maps out future supply chain trends noting that , “By 2023, at least 50% of large global companies will be using AI, advanced analytics and IoT in supply chain operations.”
It’s an impressive number that may prompt you to redouble your efforts to bring these technologies into your own enterprises – or risk falling behind the competition. But just because emerging technologies are generating massive amounts of buzz right now, it doesn’t mean success is guaranteed. If you’re considering supply chain applications and technology, beware of new solutions looking for a problem to solve. It would be wise to evaluate each technology’s impact on business objectives to determine its ability to move the needle regarding the business objectives.
When considering these trends, leaders are prudent to place organisational energy and efforts towards technologies that have broad applicability across industries and use cases. The digital supply chain twin, one of Gartner’s eight emerging supply chain tech trends, is a great example.
According to Gartner, “The digital supply chain twin is a digital representation of the physical (often multi-enterprise) supply chain. It is a dynamic, real-time and time-phased representation of the various associations between the data objects that ultimately make up how the physical supply chain operates.”
It depicts the relationships between products, customers, markets, distribution centres/warehouses, plants, finance, attributes and weather to understand the state, respond to changes, expand processes and add significance.
The digital supply chain twin is an end-to-end time phased model of your supply chain. On the horizontal level, your supply chain is recreated in a digital space in a farm-to-fork fashion encapsulating your suppliers, manufacturing locations, distribution facilities, transportation lanes and customer locations. Vertically, it contains a view of each facility. Models can be built from an extremely fine level of granularity to years in the future to allow for the evaluation of different trade-offs. Reviewing and evaluating all the costs flows allow for a complete trade-off analysis. Decisions driven in this manner by nature are interconnected.
Predictive and prescriptive analytics are applied to the digital supply chain twin to make comprehensive, quality decisions quickly. Use cases include creating a model of the supply chain for end-to-end visibility and awareness and implementing AI platforms that consume data to generate a digital representation of the relationships. Today, one major automotive manufacturer has deployed a digital twin of their inbound supply chain model and was able to cut their inbound transportation spend by over 11%. That level of savings is far from unique and companies typically report an average savings of between 8-15%. It is for that reason why Gartner recommends “putting the notion of a digital supply chain twin at the centre of your technology roadmap.”
Organisations have for decades deployed ERP systems to reduce operating costs, drive efficiencies and standardise processes. While those systems are generally optimised upon setup, the master data is often not revisited as the business’s operating environment changes. Sales orders may be fulfilled and shipped from locations that are not the most cost effective and upstream supplier sourcing decisions may not optimised, or even taken into account.
Many companies today have access to real-time data, yet struggle with harvesting that information and converting it into meaningful insights. Siloed organisational structures can’t harmonise and share information horizontally or cross-functionally. By contrast, those that have embraced digitalisation are able to connect physical functions through a digital twin, leading to the creation of supply chain control towers that can synchronise demand flows.
However, true enterprise-level decision making is still missing for many organisations; hence the key reason why the end-to-end digital supply chain twin is an emerging trend. The ability of the digital twin to sit above these systems provides insights into interconnected decisions that are inherent in supply chains. It allows the flexibility for performing scenarios that can be evaluated without having to necessarily conform to the design constraints of your current supply chain.
The notion of a digital representation of real-world entities or systems is not new. Its heritage goes back to computer-aided design representations of physical assets or profiles of individual customers. IoT has re-energised interest in the digital supply chain twin concept today.
In this case, the digital-twin trend focuses on creating the appropriate digital representations of the operations of physical assets in the real world. Digital twins include the model, data, a one-to-one association to the object and the ability to monitor it. They are linked to their real-world counterparts and are used to understand the state of the thing or system, respond to changes, improve operations, and add value.
Supply chain digitisation has the potential to significantly improve enterprise decision-making. Companies who want to keep their finger on the pulse of latest supply chain trends should consider the establishment of a digital twin within the context of your organisation’s supply chain design and enterprise decision-making process.
With thanks to contributions from the LLamasoft Blog.
Business Modelling Associates is the official distributor and reseller for the LLamasoft suite of products in the sub-Saharan Africa region.