Digital Twins have moved from a nice to have, to a must-have mandate.
-Karin Bursa
Episode Summary
Digital Twins have moved from a nice to have, to a must-have mandate. The pandemic exposed weaknesses in our global supply chains – gaps or more accurately fragility in our supply chains at a time when we need significant agility and greater resiliency. As Supply Chain Movers & Shakers, you are working hard to help your companies gain greater visibility, better flexibility, and more responsive agility as you are leading your businesses through a gauntlet of shortages, constraints, disruptions, and geopolitical events. This crossover episode of the TEKTOK Digital Supply Chain Podcast will help you understand how a DIGITAL TWIN can help.
Episode Transcript
Intro/Outro (00:01):
Welcome to TEKTOK digital supply chain podcast, where we will help you eliminate the noise and focus on the information and inspiration that you need to transform your business impact supply chain success and enable you to replace risky inventory with valuable insights. Join your TEKTOK. Host Karin Bursa. The 2020 supply chain pro to know of the year with more than 25 years of supply chain and technology expertise and the scars to prove it. Karin has the heart of a teacher and has helped nearly 1000 customers transform their businesses and tell their success stories. Join the conversation, share your insights and learn how to harness technology innovations to drive tangible business results. Buckle up is time for TEKTOK powered by Supply Chain Now.
Karin Bursa (01:14):
Well, welcome back supply team movers and shakers Karin be here and I am your host for TEKTOK the digital supply team podcast. I need to start today’s episode with a great big gigantic. Thank you. Thank you for helping TEKTOK. Get recognized on two different podcast lists. This is very exciting for me. TEKTOK was named number 16 on the feed spot 2022 list of best supply chain management podcasts and supply chain. Now, which of course brings you TEKTOK was once again, named number one on the feed spot 2022 list. So congratulations to the entire supply chain now team, and thank you for all you do to share insights and help build our industry. And thanks once again to all of you each and every one of you. Supply chain, movers and shakers for helping tech talk, get recognized by feed spot as well as by the JB F top industry podcast list for 2022.
Karin Bursa (02:26):
I really appreciate it. Now, if you wouldn’t mind do me another favor and please share this episode with at least three people in your network and be sure to subscribe to TEKTOK wherever you get your podcast. That’s T E K T O K digital supply chain podcast. I’d also welcome your connection on LinkedIn. All right, let’s dive into today’s digital supply chain topic. We’re gonna be talking about digital twins, you know, growing up. Did you ever wish you had a twin? I know I always wanted a twin one that was smarter than me and could do all the tasks that I didn’t wanna do. I figured that this would free me up and give me more time to do whatever it was I loved doing at the time. And having someone else take care of some of those tedious tasks and chores, you know, like most eight year olds, my vision was not fully rooted in reality.
Karin Bursa (03:31):
I recognized that and although I do have an older brother, there were no twins, digital or physical to be found. So I muddled through on my own, but you know what, today you have an option and that option is a digital twin for your supply chain. So digital twins have moved from a nice to have to a must have mandate for your business. You know, if there’s one thing the pandemic did, is it exposed weaknesses in our global supply chains gaps for some of us more accurately, the fragility in our supply chains. And that happened at a time when we actually need significant agility and greater resilience. So as supply chain, movers and shakers, I know that you are working hard to help your companies gain greater visibility, better flexibility, and become more responsive, more agile as you’re leading your businesses through what probably feels like a gauntlet of shortages constraints, disruptions, geopolitical events, you name it.
Karin Bursa (04:52):
We’ve got a little bit of everything. And before we dive into the digital twin, let’s remember that our ultimate goal of our supply chain strategy is to contribute to your company’s goals, moving the business forward, serving customers and creating a competitive advantage. Now this involves more than just optimizing your supply chain plan, you know, at TEKTOK, digital supply chain podcast. Have you ever thought about what exactly do we mean by digital supply chain? Well, the digital supply chain incorporates of course, information technology. That’s your software and services, the advanced analytics, your business process modeling, and the data required to improve visibility and efficiency across all activities teams and training partners. Those trading partners are your customers and your suppliers. All of that, that is required to ultimately create value for your business and satisfy customer needs. So digitalization has taken giant leaps forward in the last five years, giant leaps in the last five years, that puts us before COVID or the impact of COVID 19 solution providers were developing cloud based solutions that incorporate machine learning, artificial intelligence, the internet of things, sensors for realtime data.
Karin Bursa (06:36):
Oh yeah. And digital twins that leveraged advanced analytics and the ability to ingest large. And I do mean large data streams. And today supply team leaders must understand and prioritize technology that can help accelerate digital transformation. That’s why you often hear me say at TEKTOK, our goal is to help you replace risky inventory inventory that we’re holding just in case it’s needed with valuable insights, right? Replacing inventory with data and intelligence, these digital initiatives should be prioritized so that you can create tangible value for your business. One area to consider is leveraging supply chain solutions that incorporate a digital twin that’s right. A digital twin. So what exactly am I talking about when I say digital twin? Well, it is in fact, a digital representation of your physical supply chain. The digital twin is designed to help you accelerate, planning, evaluate multiple scenarios for your business and improve decision making.
Karin Bursa (08:06):
And another outcome will be the ability to boost confidence in the supply chain response of your organization. The bottom line is that supply chain planning is all about decision making. And the digital twin is the next evolution of supply chain planning. The digital twin provides a logical and sometimes even a geographic 3d visualization of your supply chain network. So not only does it show you where your nodes are, but it should alert you to pressure points. It should give you visual indicators of where constraints or issues or a failure to meet. Your business plan are currently happening or predicted to happen in the future. It should also help you model your business so that you can evaluate multiple scenarios and that’s gonna help you mitigate risk and harness new opportunities. Now, for any of you that are listening, that are supporting supply chain technology today, I want you to hear me very clearly because the digital twin is much more than a data model.
Karin Bursa (09:30):
It’s much more than a static logical model of your global network. Although having a clear understanding and access to a, a clear and accurate data model and a robust logical model, these are really important stepping stones, but they are just that stepping stones to creating a digital twin. So a digital twin is gonna be a robust virtual model of your global network and it is going to span multiple planning, horizons. That’s right. I said, multiple planning, horizons, anybody out there going, wait, wait, Karin, what do you mean? What the heck is that? Okay, so stay with me now, when we talk about planning, we often talk about planning across three broad horizons. The first is a strategic horizon. And when we talk strategic, we are typically looking at 24 plus months. Some companies will stretch that planning horizon out as far as 10 years. And that allows them to do things like incorporating new manufacturing facilities, new distribution centers, penetration into new markets.
Karin Bursa (10:55):
So they’re making these large capital investments and they’re modeling the capabilities, the anticipated sales and the ability to respond and satisfy customer needs in a strategic horizon. Again, beyond a 24 month horizon for most businesses, then you look at tactical horizons. So tactical horizons is where most supply chain planning focuses. And this is anywhere from about three months to about 24 months. And that is our ability to forecast and respond, produce, procure, distribute goods inside that tactical window of time. So now you may be thinking why, why stop at three months? I’m giving you that three month benchmark. As most companies have a fixed lead time for their business. That’s about 12 weeks. So I’m just arbitrarily giving you that as three weeks to or three months to 24 months in that tactical horizon. If you are able to respond faster, if you don’t have a frozen time fence, that is 12 weeks long, maybe yours is eight weeks long.
Karin Bursa (12:16):
Then your tactical horizon would be that kind of eight weeks to 24 months. So inside your frozen horizon, your ability to produce procure goods for market that is considered your operational planning horizon. That is what we’re doing day in and day out. We’re fulfilling customer orders, but we’re typically not producing or procuring inside that window. Right? So strategic typically 24 months or more tactical, somewhere between three months and 24 months and then operational hours, or even minutes up to days or weeks, that’s my operational period of time. Now the reality is these things are all connected. What happens today impacts what happens three weeks from now, what happens three weeks from now may impact what happens four months from now, right? So you can see how all of these plans need to be rooted in the same model of my business and need to validate various attributes and capabilities along the way.
Karin Bursa (13:34):
Thus the need for multi horizon planning. Now, historically these planning horizons were actually planned in different systems, different products or different solutions. You’ve probably heard the terms of supply chain planning, demand, inventory, production planning, and then you’ve heard supply chain execution, which has meant warehouse management order pick pack, and ship and transportation. In essence, executing the plan that was put in place in supply chain planning. Now for a decade or more, we have been talking about the convergence of supply chain planning and supply chain execution. So bringing together, if you will, both the tactical and operational horizons, what supply chain digital twins are enabling us to do is to not only bring the tactical and the operational horizons together, but to bring the strategic horizons together as well. It’s exciting. I gotta tell you I’m geeking out just a little bit, but it is very exciting to see all of this coming together in a single plan or a single model for your business, that we can look at different granularity and different periods of time to run our business.
Karin Bursa (14:59):
So let your digital twin model and test your network so that we can proactively expose any inefficiencies, any choke points that we need to address digital twins will create a digital version of your global supply team network. And they’re gonna include things like manufacturing, facilities, distribution centers, key transportation lanes, and even assets, transportation assets, whether they are trailers or trucks or ships or air cargo, or even drivers, which continue to be a constraint in many markets. They’re also going to include things like your inventory policies or key customers and locations. And even of course, some of those critical suppliers that are helping you to either procure raw material or critical componentry or finished goods in your network. So building and maintaining a digital twin is not just a simple network modeling exercise. It needs to be part of your living and breathing supply chain. It is a living an active part or an active representation of your capabilities, and it must be connected to both your planning and the actual execution of your business.
Karin Bursa (16:34):
It’s got to stay current to your capabilities as well as the current market conditions. So this current market condition monitoring, you are seeing a number of solutions in the marketplace that talk about supply chain visibility, and that visibility is really monitoring the movement of goods, right? And that is typically happening inside lead time for many companies, again, bringing all of these elements together, across all of the planning horizons. So it requires some cross-functional collaboration. Um, and it’s gonna include your supply chain team, your production team, your warehouse teams, your distribution teams, your finance, um, your, uh, information technology, your it teams, your data science teams, bringing all of this cross functional team together to help you model the capabilities in your network. Okay. If you are multitasking, come back to me for just a minute. I wanna review with you why the big, why we need to invest in creating a digital twin.
Karin Bursa (17:48):
So experience shows that digital twins actually boost the agility of a business and improve the quality of overall decision making. And the results are tangible. That’s right, measurable, tangible. You’re gonna see in a number of different areas. And the first I’m gonna start with the top line revenue impact. You are going to see an increase in revenue potentially by as much as two or 3% for your top line, better service at a lower cost is also gonna boost your overall profitability. Having a digital twin is gonna help you improve your on time in full fulfillment rates, and you will see a faster time to market that’s right. We’re gonna replace risky inventory with valuable insights. Speaking of replacing risky inventory, you are gonna see some inventory reductions as well. When you implement a digital twin, you will see increased inventory visibility. And that is across all inventory form and function form finished goods, work and process raw material and function. Things like presentation, stock fill stock, right? So we are gonna increase our visibility across all inventories form and function. We may see inventory reductions by as much as 10%. That’s right. Double digit reductions in inventory. Talk about tangible. So with lower cost and those lower costs are not just measured in inventory dollars, but they’re also measured in areas like reduced expediting cost, improved visibility on our response to disruptions and the ability to quickly and actively replant business alternatives.
Karin Bursa (20:01):
Now, part of that replanning is in fact, the ability to stimulate and optimize network-wide capabilities. So I’ve got this model, this digital twin, and now I have the opportunity to apply prescriptive, predictive, and other advanced analytics that are going to allow me to drive decisions that range again, from strategic to tactical, to operational. So your future needs, right, our future needs are what that is our forecast. That is our market forecast or our customer forecast, along with our ability to procure either material or finished products to produce. If we are a manufacturer and to store and distribute those goods. Now that can all be simulated in a digital twin, and we’re gonna do that so that we can gain insights. We can test alternatives, we can evaluate alternative scenarios for our business, and we can respond to disruptions. This becomes the basis of your supply chain plan.
Karin Bursa (21:21):
Now another way we are gonna manage the impact or we’re gonna measure the impact of our digital twin is with confidence. That’s right. Confidence. Don’t underestimate the value that great decision making confidence is gonna bring to your business. So just think that instead of conducting three, what if scenarios that you may have done in an spreadsheet that today you are able to evaluate 300 scenarios in a fraction of the time, then you take a closer look at the top three scenarios. These become candidates that meet your business goals and give your team the insights that they need to make a decision. How confident would you feel about taking the next right step? I mean, I know I would be much more confident. I say, sign me up. I am ready. 300 or more scenarios versus three scenarios and actual digital model of my network versus something in Excel.
Karin Bursa (22:35):
I mean, you are helping me see blind spots that I can’t see on my own. That’s what your digital twin is gonna do. So how do you get started? Right? Since we can’t just wave a magic wand and produce, a digital twin, most digital twins are designed or modeled piece by piece tested, validated, and then scaled until we get to a full and robust digital twin of our entire end to end enterprise network. You know, some visionary businesses are also including key customers and critical suppliers to create a multier enterprise digital twin. So where do we start? Let’s start with an area of our supply chain. And I suggest that you look at a problematic area of your supply chain. I suggest that look at something, that’s got a fair amount of uncertainty around it, or we’re challenged by constraints, or you feel like your people are just Ling through this process.
Karin Bursa (23:50):
This is gonna give your team focus. And the impact that they make is gonna be recognized across your business. And when that happens, it’s gonna inspire more investment from key stakeholders. And this is going to accelerate the next steps in driving your end to end supply chain digital twin. Now, according to Gartner, Gartner tells us there are seven building blocks for the ultimate digital supply chain twin. So the ultimate digital supply chain twin, we’re gonna put these seven items in the show notes. So if you don’t have a pen or paper with you right this minute, just check the show notes. So according to Gartner, the seven building blocks are as follows. Number one is that I have to have a way to visualize my supply chain. So supply chain visualization, what does it look like? Where are my nodes? What are my, uh, transportation lanes to be considered?
Karin Bursa (24:54):
Number two targets and policies and rules and constraints. That’s a lot. I just said a mouthful targets, policy rules, constraints, number three, time, phased pegging relationships. So if a happens pegged to this timeframe, then B happens here, C et cetera, et cetera, so that we really have a comprehensive view of our business. Number four probability distributions. So that ability to model multiple scenarios for the business and to look at a distribution of outcomes, number five, correlations and configurations, again, if a happens then B, C or D happen, if B happens, maybe X, Y, or Z happens and number six entities. So this is the ability to model things like production facilities, distribution centers, key transportation lanes. We’ll have some attributes around those and some parameters. So, you know, daily capacity, for example, might be something that is included in each and every one of those entities and number seven real time transactions that’s right, real time, or as near real time, as you’re prepared for now, this could come through O T devices, the internet of things, our ability to look at sensors in the marketplace and get those signals quickly so that we can respond faster.
Karin Bursa (26:32):
So this could be something like a replenishment signal on a tank that we’ve sold a certain quantity through a certain channel. And therefore we need to trigger replenishment order that we’re out of raw material at a location that we’re out of packaging that needs to be replaced. It could also be things like events and yes, of course, events can be commercially driven events like promotional activities, but events can also be things like weather events or disruptions, right? It gives us the ability to get very granular and start localizing our ability to either serve demand or that might influence demand in a particular area, right? You with me, right? Ice storm comes, I can’t have trucks on the road. It’s gonna take me longer to deliver heat wave occurs. Oh, people are gonna want more product. I’m gonna see a spike in demand, right? So those things are gonna happen differently in different geographies, but those are realtime events that can be incorporated to help us refine our plans inside some of those operational time horizons.
Karin Bursa (28:02):
Right? So back to multi horizon planning, this is why that operational, uh, insight is so very valuable. Your digital twin is gonna become the very heart and brain of your dig digital supply chain initiative. And it’s gonna include things like advanced analytics. So when we say advanced analytics, I’m not just talking about pretty pictures. In fact, I’m talking about four different types of analytics, four different types of insights. The first you are probably most familiar with, and that is just descriptive analytics. So descriptive analytics, tell me what is, or what has happened. So they almost look at like what’s happening today and backwards. So they may incorporate some of the things that you’ve done in your reporting in the past, but also what your current business intelligence initiatives might be bringing to the table. The second type of analytics are gonna be diagnostic. So why did it happen?
Karin Bursa (29:19):
What were the root causes, right? Because I wanna scratch beneath the surface and make sure that we are modifying and changing things that will prevent bad things from happening in the future, or do more of the good things that our team has delivered. Those are your diagnostic analytics. The third type is gonna be predictive. So this is where it gets really interesting because I am predicting what is gonna happen in the future and doing that increasingly with greater and greater precision. So not just, what’s gonna happen top line for the enterprise, but what’s gonna happen in a particular market or for a particular product family or a product family within a market or within a channel. And then finally prescriptive and prescriptive is gonna give me suggestions and actionable insights on what I should do next. So given what we know, the best information we have, and our current plan here is a prescription.
Karin Bursa (30:29):
Here are recommendations of the next logical things to do. These advanced analytics are gonna provide new insights that are gonna help you make better decisions. So gonna increase your competitive advantage and drive greater agility. If you leverage them, you are likely to see shorter lead times increased forecast accuracy. You’re gonna accelerate your inventory turns and you are gonna get even more productivity out of your available manufacturing capacity. And remember, our overall objective is to drive decision making that supports the ultimate goal of our supply chain strategy, which is to do what it’s to contribute to the company’s business goals, to serve our customers and to create a competitive advantage. So with a digital twin, you are gonna empower your business to make better decisions faster each and every day. So thank you so much for joining us today and remember that we need your help to spread the word. So please share this TEKTOK episode with three connections, and don’t forget to subscribe to TEKTOK. That’s TEK TOK, wherever you get your podcast. Our goal with TEKTOK digital supply chain podcast is to help you eliminate the noise and focus in on the information and inspiration that you need to transform your business and replace risky inventory with valuable insights. We’ll see you next time on tech talk powered by supply chain. Now.
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