The post-COVID-19 era has brought significant changes to the supply chain, creating lasting fissures. Amidst the backdrop of increasing globalization, rising customer expectations, and double-digit shipping growth, supply chain organizations are under immense pressure. They face challenges related to operational efficiency, demand forecasting, inventory management, and fulfillment across various industries such as retail, technology, automotive, and more. This complexity has led to stalled growth and missed revenue opportunities.

Unlock the Potential of Digital Twins in the Post-COVID Supply Chain

Digital Twins: The Key to a Resilient Supply Chain

Under these challenging circumstances, organizations that fail to recalibrate their supply chain operations risk being left behind. Digital twins offer a solution by helping with the necessary recalibration. Leading companies are already leveraging them to ensure their supply chains are flexible, agile, and responsive enough to overcome unexpected disruptions.Digital twins are virtual replicas that use real data to simulate potential situations and deliver analytical insights. They can be used to model the interaction between physical and digital processes throughout the supply chain, providing a clear picture of an optimal end-to-end process. When paired with predictive AI, they become both predictive and prescriptive, leading to a self-monitoring and self-healing supply chain.For example, a retailer uses digital twins to set dynamic SKU-level safety stock targets for each fulfillment center, adapting to localized and seasonal demand patterns. This granular optimization extends to every part of the end-to-end supply chain, resulting in significant improvements such as a 20% improvement in fulfilling consumer promise, a 10% reduction in labor costs, and a 5% revenue uplift.

Digital Twins and SCM Software: A Perfect Match

Today's supply chain management software has automated many parts of the supply chain. Digital twins can integrate with these existing tools, functioning as an innovation layer on top of the tech stack. They optimize data inputs into SCM tools, generating predictive analytics to address multiple potential scenarios.For instance, a global OEM created a digital twin to optimize its outbound logistics policies in the TMS platform, reducing costs for freight and damages by 8%. Digital twins help in several ways, such as providing end-to-end connections, enhancing resiliency in dynamic markets, optimizing across competing priorities, and testing for variability.An automotive OEM used digital twins to dynamically shape demand based on supply availability and operational complexity, reducing last-mile transportation costs by 5%. A consumer-packaged-goods company measured variable demand and labor in its warehouse and reduced total distribution center costs by 15% using digital twins.

A Deep Dive into Digital Twins

Seeing digital twins in action is crucial to understanding their value in the supply chain. Let's explore some potential use cases:- **Forecasting and Demand Planning**: Two people analyzing various charts and graphs symbolize data analysis and strategic demand planning. Digital twins help predict demand accurately.- **Sourcing and Production Planning**: An isometric illustration shows a streamlined sourcing, manufacturing, and logistics process using digital twins.- **Optimizing Supply**: The distribution center network is illustrated with lines representing the flow of goods and inventory levels. Digital twins optimize supply throughout the network.- **Distribution Center Network**: Data streams between distribution centers show the efficiency of the network. Digital twins play a vital role in optimizing this network.- **Network Design**: The design aspect is emphasized, highlighting how digital twins contribute to an efficient supply chain network.- **Inventory Management and Positioning**: The importance of inventory management is shown, with digital twins optimizing inventory positioning.- **Warehouse Optimization**: The warehouse is optimized using digital twins, improving overall operations.- **End Customers**: The flow of packages and data between the warehouse and customers highlights the significance of digital twins in fulfilling customer orders.- **Fulfillment**: The fulfillment process is enhanced with digital twins, ensuring timely deliveries.- **Reverse Logistics**: The reverse logistics process is also optimized with digital twins, reducing costs and improving efficiency.

Understanding the Benefits of Digital Twins

Supply chain organizations are leveraging digital twins to optimize both long-term strategies and everyday operations. The most common uses include inventory positioning and forecasting, managing the flow of goods within warehouses and factories, and aiding in production planning.Strategically, digital twins can derisk long-term planning by simulating potential outcomes. For example, a retailer used a granular digital twin to test the implications of a new distribution center design and found they could resize and relocate it on 50% less real estate without compromising functionality.Operationally, digital twins act as a "one model to rule them all," optimizing daily decision-making. The same retailer used its digital twin to optimize cross-dock footprint and daily inventory positioning decisions, resulting in a 10% improvement in regional distribution center utilization and a 5% reduction in fulfillment costs.

Getting Started with Digital Twins

While supply chain organizations recognize the value of digital twins, few have implemented them at scale. Digital twins often require a customized build, which takes time and investment. Organizations need in-house data science and development teams or partner with outside vendors.To succeed, organizations should focus on five key tenets:- **North Star Road Map**: Determine the vision for the future supply chain and prioritize end-to-end use cases.- **Data Visibility**: Identify data inputs and outputs for each use case and build a data product road map.- **Technology Architecture**: Ensure the tech team has the flexibility to scale compute resources as needed.- **Talent**: Assess the skills needed and provide agile upskilling and training.- **Optimization and Simulation**: Identify the first use case and build optimization and simulation modules.End-to-end supply chain optimization requires a mindset shift at all levels. Internally, companies should eliminate silos and rely on data-driven decision-making. Externally, they should analyze their roles in the global supply chain. Digital twins can help predict potential disruptions and enable companies to react and adapt.