A digital twin is a great tool, but is it what your supply chain needs?

When you need to make quick, high-confidence supply chain decisions in near-real time, nothing beats a digital supply chain twin. However, if you’re laying out a three-to-five-year strategic plan, you may be barking up the wrong tree.

In the supply chain design practice at NTT DATA we often have clients ask about developing a digital supply chain twin. They want to know if developing a twin of their supply chain network is worthwhile. We’ve found that using — or not using — strategic network design software with a digital twin depends on what types of decisions you’re trying to make.

What is a digital supply chain twin?

At its core, a digital twin is best suited to improving tactical — not strategic — decision-making. It enhances the timeliness, reliability and comprehensiveness of the examined information. A digital twin is a framework that consists of data and specific, requisite capabilities.

A digital twin is unlikely to be created in one fell swoop. Instead, it’s more apt to be built over time from granular and often near-real-time transactional data to accommodate specific decision support demands. Because it represents near-real-time conditions, a digital twin can support decisions such as creating time-phased demand pegging based on distribution and production orders, finished goods, work-in-progress inventory and manufacturing capacities.

There's a definite role for using a network model within a digital twin. This is particularly true when the network model in question will be used to make informed tactical decisions. Additionally, we believe the potential benefits of employing a network model to make recurring tactical decisions is the strongest use case. It justifies the time and expense involved in developing a digital twin. That said, building a digital twin primarily to support traditional forward-looking strategic decisions isn’t a justifiable exercise or expense.

Digital twins and strategic decision making

A data warehouse or digital twin could support a baseline representation of your supply chain network. However, you need a more traditional, forward-looking strategic network model to improve strategic decision making. The model improves the accuracy and depth of the information under consideration and deals with conditions three to five years in the future. As a result, you’ll more than likely use projected data for this forward-looking strategic network model. That data will relate to future demand, future locations, future costs, future capabilities and future capacities. However, for the most part, none of the inputs will represent the possible conditions present in near-real time.

Near-real-time data doesn’t support strategic decisions. So, why would you spend money to capture high quantities of granular real-time data to make real-time decisions when your goal is to support building a model that consists predominantly of projected data? These traditional forward-looking network models don’t require real-time data and don’t support real-time tactical decision-making. Furthermore, the data used to make tactical decisions may or may not be meaningful when making strategic decisions.

But when your organization requires tactical or master-planning-style decision support, building a digital twin with a network model may be the way to go. It’ll improve confidence in your decisions. We’ve helped many consumer packaged goods (CPG) companies make better recurring, tactical and master-planning-style decisions. These include:

• Re-optimizing customer-to-plant or product-to-line assignments across existing plants and lines
• Introducing intermodal service along lanes where it wasn’t previously used
• Changing distribution service territories in response to evolving rates and demand
• Leveraging plant-direct opportunities on a more consistent basis
• Adjusting seasonal inventory deployment plans in response to evolving rates and demand

The right tool for what your organization wants to accomplish is within your grasp. Learn how our supply chain design experts can help you obtain the kind of data and the appropriate methods that'll allow you to make confident decisions.