Digital Twins and the Benefit to Your Supply Chain

Key Takeaways:

• Supply chain management is experiencing rapid digital transformation with the integration of digital twins.
• Digital twins offer comprehensive benefits for supply chains: process optimization, cost efficiency, sustainability, and risk mitigation with end-to-end visibility.
• With advancements in AI, IoT, and blockchain, digital twins align with Industry 4.0 principles for a more agile, sustainable, and prosperous future in supply chain management.

Supply chain management is undergoing a digital transformation at an unprecedented pace, and at the heart of this transformation is the emergence of digital twins.

Growth is rampant in the supply chain, and all stakeholders are wrestling with maintaining the operational efficiency that will enable them to grow even more and grasp every available revenue opportunity.

According to Intelligent CIO, by the end of 2025, more than 60% of manufacturing companies globally will be implementing Industry 4.0 solutions, of which digital twins are a part.

IDC also forecasts that 35% of G2000 companies will use supply chain tools that feature digital twins by 2027.

But what are digital twins, and what does this mean for the supply chain industry?

Digital twins provide real-time visibility, predictive analytics, and cost-saving efficiencies to usher in an era of optimized supply chain processes. This game-changing technology offers a pathway to reduced disruptions, lower costs, and improved sustainability, enabling companies to gain a vital competitive edge.

What Are Digital Twins?

Digital twins are sophisticated virtual replicas of physical systems, processes, or assets. These replicas continuously update in real time, drawing from data sources such as IoT sensors, AI-driven analytics, and simulation modeling.

Unlike traditional data models, digital twins offer a dynamic representation, so companies can visualize processes, anticipate issues, and test changes in a controlled digital environment before implementing them in the real world.

When part of a single system, digital twins create an immersive experience that duplicates and links all parts of an organization to create an optimized simulation with scenario planning that greatly improves decision-making.

How Supply Chains Are Using Digital Twins Today

Today, supply chains are utilizing digital twins across various functions to gain end-to-end visibility, predict disruptions, optimize processes, and improve both long-term and real-time decisions.

• Process optimization: Companies use digital twins to simulate scenarios in supply chain workflows to identify and eliminate inefficiencies and streamline operations without disrupting operations in the real world.
• Transportation: By optimizing routes and fleet management, digital twins improve fuel efficiency to reduce both transit time and cost.
• Warehousing: Using digital twin technology helps minimize space waste, automate fulfillment processes, and improve labor productivity to increase warehouse efficiency.
• Inventory management: Real-time monitoring via digital twins prevents stockouts and overstocking to optimize inventory levels and ensure a seamless flow of supplies.
• Forecasting and planning: Using AI-driven simulations, supply chains can predict demand fluctuations and potential disruptions for proactive decision-making.
• Sourcing and procurement: Digital twins can be used to evaluate supplier risks so companies can identify cost-effective sourcing strategies.

Digital twins can be used to design a resilient and sustainable logistics network to improve and facilitate global supply chain operations that withstand various disruptions.

The Business Benefits of Digital Twins

Research highlights several advantages of adopting digital twins.

A Capgemini Research Institute report highlights a 25% performance improvement and a 65% benefit via increases in sales and customer satisfaction coupled with reduced costs and improved sustainability.

One auto manufacturer uses digital twins to create virtual factory and vehicle replicas to optimize planning, improve efficiency, and enhance sustainability. The result? A 30% increase in production efficiency.

Yet another auto giant saved 40% on prototype costs with digital twins, and another realized a 20% decrease in downtime.

A major retailer uses digital twin technology to create replicas of its stores and supply chain. This enables the simulation of layouts, optimization of operations, and an improved customer experience.

In the pharmaceutical sector, digital twins are used to improve drug development and delivery.

Risk Reduction

Because digital twins offer a complete, real-time view of the entire supply chain, businesses can identify potential risks early. Various scenarios can be simulated to identify any vulnerabilities and gaps to develop strategies to mitigate risks before they impact the supply chain.

Visibility means supplier, geopolitical, operational, and even cybersecurity risks can be anticipated and prepared for.

Cost Savings

McKinsey reports that one OEM slashed freight and damages costs by 8% through digital twins.

Further, they report that dynamic planning leads to lower end-to-end costs, leading to a potential 20% improvement in fulfillment delivery, 10% reduced labor costs, and a 5% increase in revenue.

Sustainability Gains

Hexagon reports a 15% CO2 reduction for companies that utilize digital twins.

The Future of Digital Twins in Supply Chain Management

The future of digital twins in supply chains looks promising with:

• AI-powered simulations: Enhanced predictive accuracy through advanced machine learning algorithms. This enables predictive analytics and self-optimization. It also improves the ability to learn from real-time data.
• Blockchain for transparency: Improved data security, data integrity, and traceability. Blockchain facilitates a decentralized, secure system to store and share data.
• 5G & IoT expansion: Digital twins are dependent on 5G and IoT expansion for real-time data transmission and analysis. This enables more accurate simulations, enhanced predictive capabilities, and more optimized processes.
• Autonomous supply chains are enabled with real-time visibility and data, predictive analytics, scenario planning and optimization, and autonomous decision-making.
• Sustainability and circular supply chains: Using digital twins to foster sustainability by enabling real-time monitoring, simulation, and process predictions that lead to resource optimization, waste reduction, and improved efficiency.

Steps to Implement Digital Twins in Your Supply Chain

Ready to implement digital twins and reap the benefits?

Here are actionable steps:

1. Assess your current supply chain. Who are the stakeholders? What are the KPIs that need improvement?

2. Assess your readiness: Evaluate your current IT infrastructure, data management, and the skill set of your team. Do you have access to the necessary data? Do you have the necessary hardware and software, as well as the infrastructure to support digital twin applications?

3. Start with a pilot program: Before you go all-in, test digital twins within a controlled segment of your supply chain.

4. Invest in the right technology: Choose the appropriate IoT sensors, AI platforms, and integration tools to support digital twin operations.

5. Train your teams. Upskill employees to make analytics-driven decisions leveraging digital twins.

Once proven, expand digital twin applications across the entire supply chain network for maximum impact.

Why Digital Twins Are the Future of Supply Chains

Digital twins not only offer a significant competitive edge for early adopters but also align perfectly with the tenets of Industry 4.0 and smart manufacturing.

With enhanced efficiency, cost reductions, and improved resilience, digital twins are set to become a cornerstone of modern supply chain management.

As companies navigate the complexities of global markets, those embracing digital twins today are paving the way for a more agile, sustainable, and successful future.