Insight

Digital Twins for agility and predictive supply chain management

Predictive supply chain management solutions such as Digital Twin/Control Towers are becoming the backbone of supply chain resiliency.

Kerim Ozbilge

Kerim Ozbilge

Advisory Managing Director, Supply Chain & Operations, KPMG US

+1 312-665-2337

Rob Barrett

Rob Barrett

Principal, Supply Chain Leader, KPMG LLP

+1 480-459-3535

Over the last few decades, organizations have been under extreme pressures to improve their topline growth, become more cost efficient, and improve their operating margins. To achieve these objectives, many companies implemented new strategies and policies which resulted in their supply chains becoming very lean, highly complex and interdependent global networks with a high reliance on low-cost countries. These changes in strategy left companies without the redundancy and flexibility required to deal with uncertainties and disruptions in their supply chains and with an inability to effectively address increasingly stringent customer expectations.

Recent global events such as the COVID-19 pandemic, the temporary closure of the Suez Canal, critical supply shortages (e.g. semiconductor chips, lumber, plastics), and rising port congestion—impacting freight, logistics, and delivery schedules—have revealed the criticality and strategic importance of the supply chain, and how it can be one the largest sources of vulnerability for any enterprise if the risks are not managed proactively.

Reverberations from these events and other ongoing disruptions continue to affect and test the commercial, operational, and financial resilience of most companies worldwide, surfacing fault lines that have existed for some time.

In today’s global economy, companies are facing tremendous complexities and risks caused by internal and external events or third parties. Despite this, many organizations are not putting enough emphasis on proactively managing their growing supply chain risks. Whether these are financial, operational, geopolitical, regulatory, compliance-based, relating to suppliers or cybersecurity, they often result in severe consequences if they are not managed appropriately. Supply chain visibility, interoperability, and collaborative decision-making across functions and partners remains a big challenge for many organizations.

Supply chain leaders are now reflecting on key lessons learned from the pandemic and other major disruptions. They are assessing their short- to long-term plans to balance cost, efficiency, and resiliency. In order to become more responsive against potential shocks and disruptions, leaders are taking actions to improve the existing supply chain structure, policies, and investment in future-ready capabilities.

The increasing maturity, availability, and cost-effectiveness of digital technologies such as big data, Internet of Things (IoT), cloud-based multitier visibility, and Digital Twin/Control Tower technologies creates opportunities for organizations to become more resilient. These technologies allow companies to better predict global risk events, by leveraging data from internal and external data sources, and assess potential business impacts across demand and supply.

COVID-19, the Suez Canal closure, and the global shortage of semiconductor chips have exposed the lack of resilience in many supply chains. Global supply chains will continue to be challenged by factors such as sudden shifts in demand, unexpected supply shortages, inventory placement challenges, and labor and logistics capacity constraints. As a result, supply chain organizations need to reassess and accelerate their digital transformation agendas.

Predictive supply chain management platforms provide the digital twin of your supply chain and operations, giving visibility and cross-functional intelligence to drive resilience.

In our conversations with chief supply chain officers/chief operating officers (CSCO/COOs) they continue to search for fit-for-purpose digital solutions and approaches that will help them future-proof their business as they manage increasingly virtual and complex networks. Predictive supply chain management solutions such as Digital Twin/Control Towers are becoming the backbone of an organization’s supply chain resiliency program. While the concept is not new, many companies are facing challenges to define the right architecture vision and implement at scale to deliver the expected business value.

The predictive supply chain management solution allows organizations to create a customized digital twin of their supply chain by implementing a virtual replica of their physical supply chain and operations, leveraging structured and unstructured data from internal operational systems and external sources.

Embedded advanced analytics capabilities accelerate the prediction, identification, and assessment of risk events that may occur holistically within the supply chain across business units and functions. They create real-time alerts, business insights, and recommended actions, with mitigation plans balancing customer service and cost, using advanced simulation and modeling.

Additionally, advanced scenario modeling tools and user-friendly graphical user interfaces enable users to model and simulate cross-functional supply chain scenarios to evaluate business impacts, thereby supporting the planning of trade-off decisions to avoid or minimize impact (revenue versus cost versus service levels). Proactive management results in fewer incidents impacting operations, which, in turn, decreases wasted resources and increases revenue.

Enterprise data sources

External data sources

Subscription data sources


 

KPMG Data Platform

Advanced analytics enables predictive analysis of risk events impacting supply chains from financial, regulatory, operational, geopolitical, and natural disaster focuses.

Solution offers network information from source of component material through to “in-market”


 


 

Advanced applications of data consumption
 
 

Predictive supply chain solutions enhance operational and financial performance by applying insights from internal operations, customers, suppliers, third-party providers, and other external data points for improved decision-making and interoperability through a holistic, transparent supply chain platform.

Key Benefits

  1. Enhance operational and financial performance by applying insights from internal operations, customers, suppliers, third-party providers, and other external data points.
  2. Improved decision-making and interoperability, increasing responsiveness and agility.
  3. Increased collaboration with external supply chain partners through increased connectivity and real-time responsiveness.
  4. Proactive management results in fewer incidents impacting operations, decreasing waste consumption and increasing revenue.
  5. Automated reporting with predictive capabilities enabling risk profiles, which change over time.

Predictive supply chain management solutions are built, not bought. They represent a strategic integration of data, process, technology, and organization, based on frank assessment of where the supply chain and operation organization is today, and a clear strategic view of where it wants to go. While executives feel the urgency to establish or perfect their predictive analytics capabilities, our conversations suggest that more would rather “build it right” than “build it first.”

How KPMG can help

  • As predictive supply chain management moves quickly from a “like to have” to a “must have” capability, crossing the divide from where you are today to where you want to be takes time, effort, and energy.
  • The specific path will be different for every organization, based upon their supply chain and operations maturity, organizational objectives, and C-level support for change. Our KPMG specialists can help CSCO/COOs design and implement fit-for-purpose capabilities by:
  • Assessing current-state operating model, designing, and architecting a future-state target operating model and digital supply chain strategy
  • Designing a future-ready solution and capability architecture with the right technology solutions to achieve supply chain resilience
  • Building strong business cases driven by return on investment, identifying “quick wins” and priority roadmap of initiatives to close foundational capability gaps
  • Accelerating the design and build journey through KPMG technology enablers and advanced analytics capabilities
  • Building an ecosystem of relevant external data and technology partners Strengthening analytics skill sets and behaviors within the supply chain organization
  • Helping to work with other enterprise functions to co-sponsor the transformation initiatives

Advanced KPMG capabilities to augment a predictive supply chain management solution

Our predictive supply chain management is a set of technology accelerators and capabilities that brings together advanced data capabilities to help build resiliency in your supply chain. Our signal repository is an active listening platform that continuously harvests thousands of data signals from public and private sources, which will have an impact on your supply chain. Our IoT implementation services help to harvest streaming data from field-deployed devices for operational and analytical purposes. Our low code/no code platform services help our clients implement intelligent automation of supply chain processes. Our simulation/optimization capabilities, with animated UI, offer the ability to experiment in the future by creating digital twin scenarios and measuring the impact of future supply chain actions.

Predictive supply chain management solutions such as Digital Twin/Control Towers are becoming the backbone of an organization’s supply chain resiliency program.