Digital supply chain twins are a powerful tool that can help businesses improve their efficiency and resiliency. But with so many different options available, it can be difficult to know where to start. In this blog post, we’ll discuss the pros and cons of building and implementing your own digital supply chain twin versus investing in a SaaS solution. We’ll also highlight some of the key factors to consider when making your decision, from your budget and timeline to your in-house technical expertise and your supply chain’s specific needs.
Digital supply chain twins, today
A digital supply chain twin can represent your logistics network. But it also can represent the other information flows that you can have in your supply chain. There are digital twins available for logistic networks—or for parts of a logistics network—for a warehouse, maybe for suppliers, management, for tracking fulfilment. But it can still be difficult to find digital twins that will handle your logistics network, your demand flow, your financial flow and then your onsite flows as well. You’ll more often than not find digital twins that will allow you to model a full factory or a site. But, it might not provide insight on the relationship between the site and the rest of the network. That remains a special capability of top-tier twins.
What are the challenges of implementing a digital supply chain twin?
A digital supply chain twin, or better yet, a best-of-breed digital supply chain twin, can truly transform your organization, fostering the kind of agility needed in today’s VUCA world. Revolutionary technology, like most good things, can of course come with its challenges. Launching a digital supply chain twin will require clearing the following hurdles:
Disparate business processes & collecting unharmonized data: A digital twin must cover many business processes. For a global supply chain operation, a lot of plants and branches—perhaps located all around the world—must deliver input for it to work properly. And sometimes, you might have to consider different business domains, including sales, finance, logistics, production, procurement, etc. These various branches and domains are likely using their own systems, creating a heterogenous IT landscape. Nevertheless, input will be required from all of them.
Beyond master data: Master data alone is not sufficient to build or run a digital twin. The goal of a digital twin is to simulate. And you cannot do this simulation if you only address the entities, locations and their attributes. You also need to describe the relationships between them. One way you can do this is through transactions.
Typically, when a digital supply chain twin is built, you can look at all the transactions that have been generated. Think of purchase orders, shipments requests, goods issued requests, sales orders, purchase requisitions, etc. It can be difficult to map these transactions, especially if they come from different systems. But it’s worth it, as it will allow you to describe the relationships between the objects. You can answer questions like: How much time do I need to produce something on average? What is the distribution?
Changing supply chain setup & dynamics: Supply chain setup and configurations and dynamics change continuously over time. New products are introduced, the macroeconomics change, there are acquisitions, etc. So, you must ensure that your digital twin can adapt. Further, the processes that are occurring have different timings; some are happening within minutes and others take months.
Why build a digital twin yourself?
If you have the time and resources to build your own digital supply chain twin, it can be an option to consider. Building it yourself will give you more control over the design and development of the twin, and you can tailor it to your specific needs. However, it can be a time-consuming and expensive process. So, let’s take a closer look:
It will fit your business. You can fit a digital twin that you build yourself for your business setup, your processes and your organization. The internal knowledge of your business is at your fingertips.
You can leverage existing IT sources. While this is true in theory, experience tells me that IT resources are often scarce. Many companies are outsourcing all their IT, which doesn’t make it any easier to build new software internally. Also, a lot of companies are simply not in the business of IT. Pharmaceutical companies, for instance, are in the business of creating and selling vaccines, medicines, etc. IT is not their core competency.
There is a lack of digital supply chain twins on the market. And thus, there’s not a lot of choice. Most have their own specialties of focus, with few that cover multiple industries and across all aspects of a business. It’s possible that there isn’t a digital supply chain twin available on the market that fits your industry or your business needs. Building might be your only real option.
Why outsource your digital twin creation?
Instead of building a digital twin in-house, you could choose to partner with a software vendor that is already in the business of creating them. If you are looking for a faster and more cost-effective solution, then buying a SaaS solution may be the better choice. This is because SaaS solutions are typically pre-built and ready to use, so you don’t have to worry about the development and maintenance costs. However, you may not have as much control over the design and development of the twin. But do the pros outweigh that con?
SaaS vendors are able to leverage their collective knowledge from working with other companies about how supply chains work. They also learn what the mechanisms look like and how they work, which helps vendors help you.
Then, there’s the flexibility. Especially if you look at SaaS products, you can try it before you buy it so to speak. If you start to build something yourself, even a small prototype of a digital supply chain twin, it will mean a considerable investment upfront. With outsourcing your digital twin creation, you get the flexibility to test it out to see if it fits your business. If you don’t like what you get, you can easily switch. This forces the vendors, the people who provide the SaaS service and digital twin technology, to stay on top of things and ensure that their product grows and evolves accordingly.
For software vendors, their offering is their speciality. It’s their single focus. For companies that partner with these companies, this means that they don’t need to expend money and resources on expensive research, a prototyping process, etc. They can follow the market evolution and can switch vendors if they want to.
You only have to pay for the use of the vendor’s digital twin technology. You don’t have to pay for or concern yourself with the infrastructure, maintenance or IT investment that you would need in order to keep such a product up and running.
The cost question
We’re going to take a closer look at costs in this debate. But first, some additional context.
If we’re considering global supply chains that want to create a digital twin of their entire network, this could mean 10, 20, 50 hundred million transactions that need to be loaded into a system. It would result in a network in which you have a representation of hundreds of locations, distribution centers, warehouses and production sites all across the globe. With all the relationships and flows that are happening for all the different brands and products that are represented in one single digital twin, we end up with millions of flows represented in such a model.
The benefits that you get out of a digital supply chain twin are the value-added processes that will run on top of that. The most obvious one is analytics; getting a clearer view of your current performance. But you can also get insight into what the risks are in your supply chain. And then, you might also want to take the next step and start running simulations. How can I mitigate a particular risk? How can I avoid it? Looking into the future, how can I optimize my supply chain? Ultimately, you can use that information and knowledge that you gain from the digital twin to actually adjust your supply chain settings. This could be through your supply chain systems or even physically adjusting the supply chain. This is an amazing capability. But, of course, it comes at a cost.
Developing your own digital supply chain twin, the costs could jump into the millions. And that’s not even taking into account keeping it up and running. With infrastructure and maintenance costs, it could run you $500,000 to a $1 million a year. Sure, you could go with an elastic, scalable cloud infrastructure that enables you to pay for only the infrastructure that you use, but that solution still requires you to create and develop an application fully for the cloud. If you go to a SaaS platform, they typically have multiple tenants using the same infrastructure. Thus, it will cost you considerably less.
If you’re thinking that outsourcing the creation, implementation and maintenance of your digital supply chain twin to a SaaS vendor is the right choice for your organization, let me make the case for Axon, which I believe brings a unique proposition to the marketplace. And that starts with our parent company, Bluecrux, a supply chain company in heart and soul.
We have a diverse blend of supply chain consultants, technical consultants, software engineers and data specialists who are explicitly in the business of supply chain optimization. For more than five years, a key component of Bluecrux’s business has been dedicated to developing, implementing and supporting digital supply chain twins for global organizations in industries like pharma, CPG, chemicals… and the list goes on.
Our latest generation of Axon is configurable, extendible and elastic. In a single digital twin, we can show representations of both product and financial flows. What’s more, it can be refreshed in near real-time for early risk detection. Axon can set up your digital twin and deliver its first insights into your supply chain in a mere 12-weeks’ time.
After that, Axon’s wave-based scaling enables small but quick deployments every 6 to 8 weeks. This helps to seamlessly complement and augment your operations without a big bang and keep your digital twin setup in sync with your supply chain evolution. What exactly will it do for your supply chain?
- Scale-up your business scope.
- Enhance your digital twin with more data sources.
- Expand your supply chain network.
- Introduce new business use and value cases.
- Increase the number of users accessing your data and insights.
It also bears mentioning that Axon is a Microsoft ISV partner. It has access to the latest SaaS infrastructure and platform software and technical advisory from Microsoft experts. Further, Axon features add-on solutions that can be implemented step-by-step. They include:
- Axon Observe: Once your digital supply chain twin is up and running, Axon Observe provides full end-to-end visibility over every level of your network. It captures both the breadth and depth of your complex operations.
- Axon Decide: Optimize decision-making with informed projections. Axon Decide brings insights to life in a fully operational simulation environment.
- Axon Control: A powerful data management suite that helps you navigate your supply chain operations. It uses intelligent analysis and actionable insights.
If you’re still on the fence about whether joining forces with a SaaS solution is the best bet for your business, let me invite you to check out a demo of what Axon can do. You don’t have to take our word for it; you can see our digital twin in action. As always, our experts here at Axon are happy to answer any questions you might have. Let us help you assess your needs and plot the best path forward to launch your organization’s digital supply chain twin.