In recent discussions around strengthening supply chains, there’s been a significant focus on agility and resiliency. A central theme in these discussions is the concept of end-to-end visibility within supply chains and its profound implications on risk management. As my colleague Koen Cobbaert points out in part 1 of this blog series on risk management, companies are striving to successfully navigate rising uncertainty and potential disruptions. In this blog post, I want to discuss how a digital supply chain twin emerges as a pivotal tool in this endeavor. I’m going to delve into the mechanisms through which a digital supply chain twin aids in risk identification and mitigation, ultimately supporting companies in safeguarding their service levels, investments and profit margins.
First, let’s agree on the terminology and the need for an integrated risk management strategy: Gartner defines integrated risk management (IRM) as “the combined technology, processes and data that serves to fulfil the objective of enabling the simplification, automation and integration of strategic, operational and IT risk management across an organization.”
In the pursuit of effective supply chain risk management, businesses encounter numerous complex challenges, including data and process integration, linking various business domains, coordinating across different geographical regions, determining uncertainty in their end-to-end supply chain, to name a few. My colleague, Koen Cobbaert, lead solution scientist for Axon Technology, wrote extensively about the current landscape of supply chain risk management in a blog post last month. Today, I’m going to explore the role of a digital twin in all of this.
A digital twin, and more specifically, a digital supply chain twin (DSCT), navigates the aforementioned challenges by replicating the supply chain in a virtual environment. It provides a dynamic solution that recognizes, identifies, profiles and understands risks. Furthermore, it can foster recovery, risk anticipation and improved future decision-making.
The DSCT serves as a sophisticated platform that monitors and observes numerous events across the supply chain, as well as identifies and evaluates the risks associated with these events. By leveraging digital twin technology, companies detect, at an early stage, anomalies—like unexpected spikes in demand or potential disruptive trends in production or fulfilment—that pose a potential risk to their strategic goals. These strategic goals can be categorized under the heading of service, investment and margin objectives. Exception events or anomalies like positive or negative trends, etc., are indicators that warrant closer examination.
Detecting and defining risk is the first hurdle. Monitoring a supply chain can be daunting due to its many moving parts. As we well know, information is often scattered across organizations and systems, making it difficult to collect, harmonize and activate that data for further analysis, and understanding the impact of potential risks on your end-to-end supply chain.
A DSCT collects information in a centralized model, continuously updating to reflect real-time changes and calculating the actual performance of a supply chain and providing end-to-end visibility. Organizations get insight into the actual relationships and structures at various levels of aggregation, providing a comprehensive, realistic overview of the supply chain with all its uncertainties. For example, these insights in the different lead times, their relationships across, and aggregated values over the end-to-end supply, production, QC and fulfilment flows; their statistical parameters as distribution, mean, median, variability, etc.
The variety of risks and their implications at different organizational levels, be it strategic, tactical or operational, adds layers of complexity; yet, documenting relevant risks in the context of the supply chain domain is crucial.
A DSCT calculates and interprets the performance of your organization’s supply chain. It models business objectives, monitors for anomalies, flags exceptions and analyzes sources of disruption, thus creating a common understanding of risk types, highlighting dependencies and classifying risks by mapping them to key performance indicators (KPIs) and industry benchmarks.
Risks vary in nature and impact, and as such, require different treatments by different parts of an organization. Digital twins simulate the impact of risks on different organization objectives, providing visibility, insights and analytics at various levels of aggregation. Using new approaches like probabilistic simulation, the understanding gleaned through these simulations, creates insight to all possible outcomes based on the combined effect of different policies and uncertainty factors. This helps in prioritizing risks and tailoring responses to an organization’s needs.
By analyzing the end-to-end network for flexibility and simulating various scenarios in near real-time, organizations can compare and select the best course of action from different strategies—avoid, reduce, accept or transfer the risk. Proactively predicting, and identifying future risks based on current performance, combined with planned activities is key for forward-thinking organizations, but it’s not an easy task at hand: organizations must establish a continuous integrated risk management strategy
Integrating forecasts and predictive analytics with a digital supply chain twin empowers probabilistic simulations that lead to better decision-making. Running advanced what-if scenarios and long-term strategic simulations are key steps in business redesign and contingency planning. As we pointed out in a previous blog, it’s what the best Formula 1 teams are doing—and what your organization can, too.
By utilizing a digital supply chain twin, companies achieve a level of insight and preparedness that allows them to manage and mitigate risks at the speed of the ever-changing global economy with its uncertainties and unpredictable events at a macro level and enables them to anticipate and prepare for future risks. This dynamic and informed approach to risk management is an essential element in the portfolio of strategies for dealing with uncertainty and improving resiliency in supply chains.
You can stay ahead of disruptions and enhance your organization’s resilience with Bluecrux’s Axon digital supply chain twin technology. Ready to revolutionize your supply chain? Book your Axon demo today.
