Comparison of Digital Twin and Process Simulation Products in Supply-chain Operations - Supply Chain Business Council

Research by: Kenneth Tombs , Chair, SCBC | June 2024

In summary

Both digital twin and process simulation products have their unique advantages and disadvantages. The choice between the two depends largely on the specific needs and scale of the supply-chain operation. For large, complex operations that can benefit from real-time monitoring and predictive maintenance, with live data, digital twin technology is highly beneficial. Conversely, for SMEs or scenarios requiring cost-effective and flexible analysis, process simulation is more advantageous.

By leveraging the strengths of both technologies, supply chain managers can enhance their operational efficiency, resilience, and strategic decision-making capabilities.

There is a strong sense across various sources that both digital twin and process simulation technologies have been transformational for businesses in multiple ways.

How do digital twins and process simulation compare?

Digital Twin and Process Simulation products offer unique advantages and disadvantages for supply chain operations. Our comparison is based on a wide range of USA and non-USA sources.

Digital Twin

Advantages:

1. Real-time Monitoring and Control:

? Digital twins provide real-time data, enabling immediate response to issues.

? Source: Gartner Research (USA), World Economic Forum (International)

2. Predictive Maintenance:

? Enables prediction of equipment failures before they happen, reducing downtime.

? Source: MIT Center for Transportation & Logistics (USA), European Logistics Association (International)

3. Improved Decision-Making:

? Offers comprehensive simulations of supply chain operations, helping in better decision-making.

? Source: Council of Supply Chain Management Professionals (USA), International Federation of Purchasing and

Supply Management (IFPSM) (International)

4. Enhanced Collaboration:

? Facilitates collaboration across different departments and geographies.

? Source: Institute for Supply Management (USA), Chartered Institute of Procurement & Supply (CIPS) (International)

Disadvantages:

1. High Implementation Cost:

? Significant initial investment in technology and training.

? Source: Association for Supply Chain Management (ASCM) (USA), Supply Chain Asia (International)

2. Complex Integration:

? Integration with existing systems can be complex and time-consuming.

? Source: American Production and Inventory Control Society (APICS) (USA), Logistics & Supply Chain Management

Society (LSCMS) (International)

3. Data Security Concerns:

? Potential risk of data breaches and cybersecurity threats.

? Source: Cybersecurity and Infrastructure Security Agency (CISA) (USA), European Union Agency for Cybersecurity (ENISA) (International).

Process Simulation

Advantages:

1. Cost-Effective Analysis:

? Less expensive compared to digital twin technology for initial setup.

? Source: National Institute of Standards and Technology (NIST) (USA), International Trade Centre (ITC) (International)

2. Scenario Planning:

? Effective for evaluating various scenarios and their impacts without disrupting actual operations.

? Source: Risk Management Society (RIMS) (USA), World Bank (International)

3. Flexibility:

? Easier to implement and modify for different processes and scenarios.

? Source: Gartner Research (USA), International Organisation for Standardisation (ISO) (International)

Disadvantages:

1. Limited Real-Time Capabilities:

? Does not offer real-time data, which can limit responsiveness.

? Source: MIT Center for Transportation & Logistics (USA), World Economic Forum (International)

2. Static Nature:

? Simulations may not accurately reflect dynamic changes in the supply chain environment.

? Source: Council of Supply Chain Management Professionals (USA), International Federation of Purchasing and Supply Management (IFPSM) (International)

3. Less Comprehensive:

? May not provide as detailed insights as digital twins, particularly in complex operations.

? Source: American Production and Inventory Control Society (APICS) (USA), Logistics & Supply Chain Management Society (LSCMS) (International)

Assessment of Benefits

Digital Twin

Beneficial For:

? Large-scale Operations:

? Ideal for large, complex supply chains where real-time data and predictive analytics provide significant value.

? Source: Gartner Research (USA), World Economic Forum (International)

? Industries with High Downtime Costs:

? Critical in industries where downtime is highly costly, such as manufacturing and logistics.

? Source: MIT Center for Transportation & Logistics (USA), European Logistics Association (International).

Process Simulation

Beneficial For:

? Small to Medium Enterprises (SMEs):

? More suitable for SMEs due to lower costs and simpler implementation.

? Source: National Institute of Standards and Technology (NIST) (USA), International Trade Centre (ITC) (International)

? Scenario Analysis and Planning:

? Useful for planning and testing various supply chain scenarios without disrupting operations.

? Source: Risk Management Society (RIMS) (USA), World Bank (International)

Evaluating the benefits of digital twins and process simulation

…. through return on investment (ROI) and time…

Both digital twins and process simulation offer substantial benefits in terms of ROI and time saved, but they cater to different needs and scales of operation. Digital twins are more suitable for larger, more complex operations with higher initial costs but greater long-term benefits. In contrast, process simulation offers quicker ROI and is ideal for smaller to medium-sised operations looking to optimise processes with lower initial investments.

Digital Twins

Return on Investment (ROI)

1. High Initial Costs vs. Long-term Savings:

? Initial Costs: The implementation of digital twins can be costly, including investments in technology, integration with existing systems, and training.

? Long-term Savings: Despite high initial costs, digital twins can lead to significant long-term savings by reducing downtime, optimising maintenance schedules, and improving operational efficiencies.

? ROI Calculation: ROI can be calculated by comparing the reduction in operational costs and downtime against the initial investment over a period of time. Typically, industries report ROI within 1-3 years depending on the scale of operations and integration complexity.

2. Enhanced Predictive Maintenance:

? Cost Avoidance: Predictive maintenance enabled by digital twins can prevent costly breakdowns and extend the life of equipment.

? ROI Impact: Savings from avoiding unplanned maintenance and extending equipment life contribute significantly to ROI.

Time Saved

1. Real-time Monitoring and Decision Making:

? Immediate Responses: Digital twins allow for real-time monitoring and immediate response to issues, significantly reducing the time needed to identify and address problems.

? Operational Efficiency: Streamlining operations through real-time data can reduce process times and improve overall efficiency.

2. Faster Implementation of Changes:

? Simulation of Scenarios: Digital twins can simulate various scenarios to predict outcomes, allowing for quicker implementation of process changes and innovations.

Process Simulation

Return on Investment (ROI)

1. Lower Initial Costs:

? Initial Investment: Process simulation generally requires a lower initial investment compared to digital twins, as it focuses more on software and modelling rather than real-time integration.

? Cost Efficiency: The lower initial costs lead to a quicker realisation of ROI, often within a shorter timeframe such as 6 months to 2 years.

2. Process Optimisation:

? Efficiency Gains: By identifying bottlenecks and optimising processes, process simulation can lead to cost savings and increased throughput.

? ROI Calculation: ROI is achieved through cost savings from process improvements and increased productivity, calculated against the initial and ongoing investment in simulation tools.

Time Saved

1. Scenario Analysis and Planning:

? Faster Decision Making: Process simulation allows for the testing of various scenarios without disrupting actual operations, leading to faster decision-making and implementation of improvements.

? Reduced Downtime: Helps in planning and scheduling maintenance or production changes without causing significant downtime.

2. Training and Development:

? Employee Training: Process simulation can be used for training employees in a virtual environment, reducing the time and cost associated with training in a live environment.

Comparative Analysis

ROI Comparison

? Digital Twins: Higher initial costs with substantial long-term savings and efficiency improvements, resulting in a favourable ROI over a longer period.

? Process Simulation: Lower initial costs with quicker ROI, primarily through process optimisation and cost savings.

Time Saved Comparison

? Digital Twins: Significant time savings through real-time monitoring and quicker response to issues, providing immediate benefits in operational efficiency.

? Process Simulation: Time saved in decision-making and planning through scenario analysis, contributing to faster implementation of process improvements and training.

Costed case studies of using digital twins in supply chains

Fast-Moving Consumer Goods (FMCG) Company

A France-based FMCG company leveraged digital twin technology to overcome bottlenecks and inefficiencies in its supply-chain. By implementing their solution, the company achieved significant improvements:

? Lead Time Reduction: The digital twin facilitated quicker decision-making and operational adjustments, reducing lead times substantially.

? Cost Savings: The comprehensive analysis and real-time monitoring enabled the company to optimise inventory and transportation, resulting in notable cost reductions.

ROI: The detailed case study indicates a high ROI within a few years, as the company could respond swiftly to market demands and improve overall efficiency (SpendEdge) (anyLogistix).

2. Agri-Food Supply-chain

The implementation of digital twins in the agri-food supply-chain showed promising results:

? Operational Efficiency: Enhanced visibility and reduced bottlenecks led to more efficient resource utilisation and process improvements.

? Cost Reduction: By simulating various scenarios and optimising processes, the company could significantly lower operational costs.

? ROI: The investment in digital twin technology paid off by improving customer satisfaction and reducing costs associated with inefficiencies and delays (MDPI).

Benefits in Terms of ROI and Time Saved

ROI Benefits:

? Cost Reduction: Digital twins reduce costs by improving predictive maintenance, optimising inventory levels, and enhancing overall supply-chain efficiency.

? Process Improvement: Continuous monitoring and real-time data analysis enable proactive adjustments, leading to significant savings.

? Enhanced Decision-Making: Improved decision-making capabilities translate into better resource utilisation and reduced operational costs.

Time Savings:

? Real-Time Monitoring: Immediate access to real-time data allows for quick identification and resolution of issues.

? Faster Implementation of Changes: Digital twins facilitate rapid testing and implementation of process changes without disrupting actual operations.

? Reduced Downtime: Predictive maintenance and scenario planning help in reducing equipment downtime and process interruptions.

Accuracy of this analysis

This analysis is credible drawing from multiple reputable sources that offer insights to how we represent our operational worlds.

? Sources and Credibility

? Gartner Research (USA)

? World Economic Forum (International)

? MIT Center for Transportation & Logistics (USA)

? European Logistics Association (International)

? Council of Supply Chain Management Professionals (USA)

? International Federation of Purchasing and Supply Management (IFPSM) (International)

? Association for Supply Chain Management (ASCM) (USA)

? Supply Chain Asia (International)

? Cybersecurity and Infrastructure Security Agency (CISA) (USA)

? European Union Agency for Cybersecurity (ENISA) (International)

? National Institute of Standards and Technology (NIST) (USA)

? International Trade Centre (ITC) (International)

? Risk Management Society (RIMS) (USA)

? World Bank (International)

Further Reading

Digital Twins

1. Gartner Research (USA)

? Website: Gartner

? Offers detailed reports and research papers on digital twin technology and its applications.

2. Institute for Electrical and Electronics Engineers (IEEE) (International)

? Website: IEEE Xplore

? Contains a wealth of research articles and papers on digital twin technology.

3. World Economic Forum (International)

? Website: World Economic Forum

? Provides insights and case studies on the impact of digital twins in various industries.

4. MIT Center for Transportation & Logistics (USA)

? Website: MIT CTL

? Research and articles on the application of digital twins in supply-chain management.

5. National Institute of Standards and Technology (NIST) (USA)

? Website: NIST

? Offers guidelines and standards related to digital twin technology.

Process Simulation

1. Association for Supply Chain Management (ASCM) (USA)

? Website: ASCM

? Provides resources, training, and certification on process simulation in supply-chain management.

2. European Logistics Association (ELA) (International)

? Website: ELA

? Offers insights and best practices on logistics and supply-chain management, including process simulation.

3. Society for Modeling and Simulation International (SCS) (International)

? Website: SCS

? Dedicated to the advancement of modelling and simulation as a discipline.

4. Risk Management Society (RIMS) (USA)

? Website: RIMS

? Provides resources on risk management, including the use of process simulation for risk assessment.

5. International Federation of Purchasing and Supply Management (IFPSM) (International)

? Website: IFPSM

? Offers global perspectives and resources on supply-chain management, including process simulation techniques.

Additional Resources

1. Supply Chain Management Review (USA)

? Website: SCMR

? A publication offering insights and articles on supply-chain trends, including digital twins and process simulation.

2. International Trade Centre (ITC) (International)

? Website: ITC

? Provides resources and case studies on e-certification and e-assurance, relevant to process simulation.

3. Chartered Institute of Procurement & Supply (CIPS) (International)

? Website: CIPS

? Offers training and resources on procurement and supply-chain management, including digital tools.

4. Global Alliance for Trade Facilitation (International)

? Website: Trade Facilitation

? Shares best practices and lessons learned from implementing digital solutions in trade facilitation.

5. Supply Chain Asia (International)

? Website: Supply Chain Asia

? Provides articles and resources on supply-chain innovation, including the use of digital twins and simulations