What is a Supply Chain Digital Twin and Why Use It

Have you ever been in a simulation? 

Like those games where you can practice some skills as if you were doing it in real life?

Well, what about using a simulation to improve your supply chain flow and overall management?

While it might sound a bit futuristic, the thing is that more and more businesses are relying on digital simulations to protect their supply chains from disruptions.

Their method?

Use a supply chain digital twin

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What’s a Digital Twin?

First things first, what exactly is a digital twin?

We can see a digital twin as a virtual representation of an object or system that doesn't remain static but rather it's constantly being updated with real-time data.

You can see it as an intelligent replica that is capable of adapting to what's happening in the real world.

The technology behind digital twins includes artificial intelligence, machine learning, and the Internet of Things, which enable real-time data collection and predictive analytics. 

They are widely used in industries such as manufacturing, healthcare, urban planning, and logistics to make businesses more efficient. 

Product vs system twins

Mostly, a digital twin can be connected either to a product or a system. 

If it's a product, then it could be a mirror or an important piece of your company's products, like a robot that must be thoroughly tested in multiple scenarios, before it's officially launched.

A digital twin of a system, on the other hand, is a complete virtual duplicate of a whole network of processes.

Which leads us to…

What’s a Digital Twin for Supply Chain?

Let us tell you a secret.

Everyone knows that supply chains are becoming highly volatile.

You need to make sure that your suppliers are the right ones for your business, but you also need to worry about inflation, potential trade wars, and that destructive flood nobody thought was possible before climate change hit us.

A digital twin of your supply chain eases that load from your shoulders. Acting as a precise mirror of your entire supply chain operations. 

It's like having a virtual model of everything. 

Your inventory, warehouses, transportation networks, suppliers, and even external factors like changes in the market or the weather.

We are going to see all of this in more detail in a bit, but to give you an overview, a supply chain digital twin is capable of:

• Run simulations 
• Predict potential bottlenecks from end to end.
• Test different strategies, and switch accordingly.
• Boost your operations efficiency.
• Cut costs, because a problem that doesn't happen is money that you save.
• Reduce serious risks

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Simply put, a supply chain digital twin gives you the power to optimize your operations, anticipate problems, and stay agile in a quite unpredictable world.

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Okay…but how does it work?

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Key Elements of Supply Chain Digital Twin

Data

If it's technology, you can bet it relies heavily on data structures. For digital twins, this comes from IoT sensors tracking shipments, ERP systems managing inventory, and even external factors like market trends and weather forecasts. The more data is available to integrate, the more reliable the simulation is for the optimization of your supply chain.

Simulation and modeling

A flexible mirror in all the senses of the world.

That means you can test different scenarios, anticipate disruptions, and see the impact of decisions before making them in real life. For example, let's say that you want to use your supply chain digital twin to see if your operations are prepared to handle certain weather conditions, when suddenly the proximity of a natural disaster is announced. 

No problem 

The digital twin will work under the new context.

Analytics and visualization

AI-powered insights help spot trends, identify inefficiencies, and predict potential issues. 

Otherwise, you could end up staring at a screen filled with data that makes no sense whatsoever to your business. Dashboards and reports make all this data easy to understand so that your supply chain teams can make faster, smarter decisions.

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Benefits of Implementing Digital Twins in Supply Chains

We know the fundamentals about how digital twins work for supply chains across different industries, but what about all the benefits of actually implementing them in your company?

More visibility

It's a common complaint 

I didn't know what was happening.

Because, of course, in a supply chain, the factors involved are so many that keeping a clear track of everything can be a daunting task.

Almost impossible 

Not so much 

With a digital twin, you get a real-time, end-to-end view of your entire supply chain. Instead of reacting to issues as they arise, you can see problems before they happen. 

Are there any serious pain points in your processes?

Then it might be time to do something to fix that. 

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Improved risk management

You might think that talks about an incoming global conflict would be too far-fetched or that another financial crisis is unlikely.

But as the COVID-19 pandemic taught us, when it comes to unexpected problems, nothing is off the table.

With AI-powered analytics, digital twins can forecast potential issues like supplier delays, transportation disruptions, or sudden demand fluctuations caused by risks and uncertainties.

Optimized operations

Are you one of those who believe that there's always room for improvement?

If you are in charge of a business or managing its supply chain, you better be.

As our world moves with such speed, companies need to be able to identify inefficiencies and optimize every aspect of their supply chain from inventory management to shipping routes. 

Testing different strategies in a virtual environment gives businesses the chance to find the most cost-effective and efficient ways to operate. 

The result? Lower costs, less waste, and better overall performance.

What-if scenarios

The digital twin lets you test different “what-if” scenarios without taking real-world risks, so if you want to know what could happen to your operations in the likelihood of a financial crisis or an extreme weather event, you can do it by running a simulation. 

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Are Supply Chain Digital Twins Suitable for All Industries?

You could say so

Digital twins provide you with so many benefits in so many areas of supply chain management that it's kind of hard to imagine them not working under certain industries. 

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Those companies that work with complex supply chains are already seeing major advantages from digital twins.  

You'll find that…

• Retailers can optimize inventory, predict demand shifts, and prevent those dreadful stockouts.
• Manufacturers have an easier time managing production lines, checking the lifecycle of raw materials, and reducing downtime.
• In healthcare, digital twins work to guarantee efficient distribution of medical supplies and minimize waste.
• For the hardware industry, it's pretty useful to improve supply chain resilience and have better supplier relationships.

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Are there any limitations?

While digital twins offer huge potential, remember that to make them work, you need to provide them access to high-quality data, invest in technology, and train your teams to manage them.

Smaller businesses, for example, with simpler supply chains may not need a complete digital twin, though they can still benefit from parts of the technology, like relying on predictive analytics or real-time tracking tools.

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Challenges of Digital Twins 

And speaking about data, it's always said that nothing good comes without a tad of difficulties. Implementing one is going to demand some effort, especially in the areas surrounding the IT capability of your business and relevant knowledge.

Data issues

Do you truly want to work with an effective digital twin of your supply chain?

Start by paying attention to the quality of your data. 

If data is incomplete, outdated, or scattered across different systems, the model won’t be accurate.

Digital twins might sound like magic, but at the end of the day, you need to feed them with the right information if you want to benefit from a successful outcome.

It's a change

And not everyone is going to be immediately on board with that.

Your staff might feel uncomfortable at the beginning, so bear in mind that they're going to need to understand how to use the system, interpret data, and make decisions based on insights.

The good part is there's nothing impossible about achieving that.

You only have to focus on training your teams, adjusting workflows, and getting buy-in from leadership and staff, which, yes, can take time and effort.

Security concerns 

With so much real-time data flowing through a digital twin, cybersecurity becomes a major concern. Businesses must protect sensitive supply chain information from cyber threats and work so that the data shared between suppliers and partners remains secure and compliant with regulations.

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