Today’s supply chains are embracing digital disruption at an unprecedented rate. After extensive, far-reaching changes over the past few years, logistics and procurement organizations are eager to find ways to become more efficient and resilient. Supply chain digital twins are one of the most promising of these new technologies.
Of the 69% of organizations that use digital twins today, 97% say these solutions are important to their business. That favorability will likely translate into increased adoption rates over the next few years. Amid that shift, supply chain businesses that don’t want to fall behind the rest of the industry should take note of this technology.
What Is a Supply Chain Digital Twin?
A digital twin is a virtual representation of a real-world object, system or process. These representations go beyond simple, static digital models and use data analytics to update in near real time alongside their real-world counterparts. That adaptability makes them a highly versatile and informative tool.
Supply chain digital twins can represent an entire supply chain, a specific facility within that network or even a single machine on a factory floor. As these real-world systems encounter new data and experience unforeseen disruption, their digital twins will update to reflect those changes. Alternatively, businesses can use the twins to simulate hypothetical situations before making expensive, potentially disruptive changes.
Implementing these systems can be challenging, as they require extensive use of real-time data technologies like Internet of Things (IoT) sensors and artificial intelligence (AI). However, the payoff is well worth the investment. Here are five ways digital twins improve supply chains.
1. Minimizing Future Disruption
Risk assessment and chaos engineering are some of supply chain digital twins’ most beneficial use cases. The need for resiliency has never been clearer, as nearly all supply chain executives report experiencing disruption from the COVID-19 pandemic alone, costing 6-20% of their revenues. Digital twins help plan for these challenges.
Businesses can use digital twins to run “what if” scenarios, simulating various disruptive events like extreme weather, stock shortages or the loss of a supplier. They can then see how well their supply chain would meet these challenges.
Simulating supply chain disruption reveals if and where a network should improve to become more resilient. For some organizations, that may mean distributed sourcing. For others, it could be working with different 3PLs. Whatever the specifics, these simulations highlight what to change and what to leave alone before companies spend millions of dollars on adjustments.
2. Enabling Efficiency Improvements
Digital twins can also reveal supply chain bottlenecks and other inefficiencies. Companies that know these can adjust their operations to reduce lead times, minimize waste or lower operating costs.
Many supply chains involve managing multiple vendors and parts, increasing complexity and costs. Creating and analyzing a digital twin can reveal if any of these dependencies are inefficient or not worth the company’s investment. Businesses can then restructure their sourcing practices to find the optimal path forward.
Companies can also simulate changes to see how they improve efficiency in the digital twin before replicating these adjustments in the real world. That way, they can find the most effective solution before disrupting their operations. Running multiple simulations and comparing the results is particularly helpful when what works for one supply chain may not for another.
3. Facilitating Collaboration
Supply chain digital twins also serve as useful communication tools. While the previous two use cases highlight their potential for informing real-world changes based on digital insights, the digital side can also change in response to the real world. That makes it an ideal way to boost transparency.
Fueling a digital twin with real-time data from IoT systems will make it an up-to-the-minute, detailed representation of the entire supply chain. Having all that information in one place makes it easier to see and account for incoming changes. Because twins are digital, sharing these real-time, overall network views with other stakeholders is easy.
Digital twins provide a single source of truth for all parties involved in supply chain operations. Using a single, up-to-date reference across all parties and processes prevents miscommunication and facilitates faster, more informed cooperation.
4. Supporting Sustainability Initiatives
Another way digital twins improve supply chains is through sustainability monitoring. Just as these virtual models highlight inefficiencies throughout the supply chain, they can reveal where most of the network’s carbon emissions stem from.
Businesses could use IoT networks to gather emissions data to create a digital twin of their environmental impact. Getting a cohesive view across the entire supply chain would make it easier to develop and use carbon calculators to set ecological benchmarks and goals.
Digital twins’ comprehensive view of the supply chain would also inform more effective sustainability decision-making. Companies could see if any suppliers are too far away, leading to more vehicle-related emissions, and simulate how switching to other sources would improve things.
5. Improving Specific Facilities
Many of the most impactful applications of supply chain digital twins recreate the entire supply chain. However, procurement and logistics businesses can also create digital twins of specific warehouses. These smaller-scale models enable more granular improvements.
A warehouse may use a digital twin to find that workers frequently travel long distances to pick products. They could then see how to reorganize their shelving to place these high-volume products closer to shipping bays, reducing travel time to boost productivity. Simulating different organizational strategies in the digital twin would reveal the best way forward.
Making digital twins of specific facilities enables small changes adding up to considerable benefits across the supply chain. It also helps companies capitalize on this technology when data from their partners and third parties may be limited, making large-scale digital twins less viable.
Supply Chain Digital Twins Are Crucial for Modern Businesses
Supply chain digital twins provide visibility and low-risk testing today’s businesses need to improve their supply chain operations. These virtual models will become an increasingly accessible solution as more companies embrace IoT and AI, furthering the case for adoption.
Supply chains must become more efficient, resilient and sustainable. Digital twins lay the groundwork for those improvements.