Digital Supply Chain Management

Principles of nature and new network design forming the digital twin of supply chains

The article explains the principles of digital supply chain management and points out why a digital twin needs an end-to-end perspective, considering the entire value chain. IoT platforms like MindSphere and Leonardo help to bring supply chains to a next level.

Digital supply chain principles of nature

For a better understanding of digital supply chains, we suggest to have a look at the life of the ants. Ants form highly organized colonies that may occupy large territories and consist of millions of individuals. Their success in so many environments has been due to their social organization in terms of swarm intelligence as well as their ability to modify habitats, tap resources and solve complex problems. Digital supply chain management typically follows the same principles.

If you look more into details you find out that today, supply chains are challenged by mass customization and, thus, an increasingly complex product portfolio and a higher number of rush orders or change requests, accordingly. Disruptions along the chain become more difficult to handle, for example because of breakdowns of logistics infrastructure, electricity blackouts, bio catastrophes or terror attacks. Also factors from the inner value chain tend to become more volatile, in terms of unplanned production shut downs, bottlenecks at suppliers or sickness of staff. Moreover, supply chain management is expected to be a key facilitator for new digital business models. The question is how, nowadays, principles of nature can help to manage supply chains.

A new approach to supply chain management

When it comes to designing supply chains today, we do it differently than in the past. We no longer do one-off exercises to determine the network, but we now permanently optimize the structure as a result of our predictions in order to balance capacities and material globally. Our planning is not a closed system anymore, however, but dynamically seeks for new disruptions and tries to counterbalance impacts. We even do not plan ourselves but try to determine intelligent planning algorithms. On the shop floor, we are questioning the traditional MRP logic and introduce demand driven steering mechanisms. Our supply chain team is not doing physical transport or warehousing anymore but manages automatic transport and warehousing systems. Modern supply chain management is based on a strong and independent supply chain governance that supports self-organization and powerful IT.

To do this on a real-time basis and efficiently, we use standard ERP tools and combine them with new technology. Big data architecture complements the classical ERP landscape and makes use of IoT and AI technologies. Process mining helps to identify the relevant use cases that determine the future architecture. We don’t do big bang waterfalls but develop in an agile way through consistent architecture cuts. IT really develops towards OT.

The digital twin of the supply chain

And then we come up with something that we call a digital twin of the supply chain. The digital twin is a complex concept and represents a virtual model of the real chain. Typically, the virtual part includes the process, cost-service, and geographical and technological dimension. Like in nature, the digital twin allows us to permanently optimize the structure and evolve it over time. Nature is doing many, many things right and optimizes over millions of years and hundreds of generations. The digital twin, however, allows us to optimize supply chains even within hours. Like in the evolution of nature, the digital twin of a supply chain is a digital twin of performance, because it supports the feedback loop for a continuous improvement of the network.

The digital twin of a supply chain adds up to the digital twin of product design, production and the internet of things. In an end-to-end perspective, new products or design adjustments need to have a proper supply chain network. The digital twin thus includes new designs that make, for example, delivery and maintenance easier. It allows us to plan, source, make, deliver and serve in a way that we have never done before. The evolutionary approach of supply chain management creates examples that enhance service levels or flexibility by 60 percent and decrease working capital as well as cost by 40 percent. These examples are very close to nature, which provides fantastic role models for great supply chains.

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