Digital Twins and Scenario Generation: The Pathway to Agile Supply Planning

Replan recently led a series of roundtables with senior supply chain stakeholders to explore the role and importance of digital twins to enable more agile supply planning. Organised by The Intent Group and held in London in September 2023, it brought together a diverse range of process and discrete manufacturers with retailers and consultants. Here are our key takeaways. 

Always be scenario planning

The complexity and volume of requests for scenario planning to enable strategic and tactical decision making has increased dramatically in the last five years. Everything from simple excel sheets to complex digital twins are being used to find answers, but with mixed success. There was broad agreement that agile planning is needed to deliver better business outcomes, and digital twins are a core enabler of this.

Scenario planning, once a periodic exercise, is now an integral part of daily operations. The requests have become more varied, detailed and urgent. Many organisations are still stuck in long decision-making cycles exceeding 4 weeks, mainly due to a reliance on complex excel models.

Having an appropriate digital twin enables organisations to rapidly iterate through new scenarios within undue delay. But the roundtable participants were divided on their maturity of digital twin use.

The Excel Conundrum

Excel has long been a trusted companion in supply chain management. But those models have inherent limitations, particularly in terms of accuracy and complexity. They also tend to be built and maintained by a single person, which can lead to bottlenecks in decision-making processes.

The majority of our roundtable attendees were still heavily reliant on Excel for their scenario planning endeavors. However, there was a notable trend of organizations actively planning a transition to dedicated software solutions. At the most advanced end, one organization now forces all new products and processes to build a digital twin as part of product release, and ensured they only selected comanufacturing partners that could support this new policy.

Key Themes in Transformation

1. Trigger to Start the Transformation

Initiating a transformation in supply chain planning can be a daunting task and needs a catalyst event to drive urgency. The COVID-19 pandemic played a pivotal role in reshaping the dynamics at the board level. Supply chain’s elevated status as a strategic enabler led to greater recognition of its significance. Boards and executives began asking complex questions, revealing the limitations of existing models. This catalyzed change, particularly in larger organizations.

Conversely, smaller organizations, marked by rapid growth and capacity constraints, found it easier to secure approval for change. In one intriguing case, a pilot was discreetly embedded within a summer intern’s role, showcasing the ingenuity required to build a compelling business case. However, organizations where this direction came from the top found the process considerably smoother.

2. How to Make It Effective

Effectiveness in transformation hinges on the ability to sustain changes once implemented. A significant point of debate revolved around ownership — should it be IT or the business? Opinions were divided, with valid arguments on both sides.

The business possesses intimate knowledge of its operations and is inherently incentivized to improve its Key Performance Indicators (KPIs). There was a concern that IT, although proficient in technology, might not always be closely aligned with the business’s goals. There’s a risk of IT spending excessive time striving for a ‘perfect’ solution, rather than delivering something that meets most of the business’s needs quickly.

However, IT have the skills to deploy solutions in a structured manner that avoid key person dependencies and are easier to maintain. The point was made during the roundtable on the importance of master data governance and whether a data lake approach would work. The consensus was that more complex data approaches like this needed to be IT led for long term success.

The recommended approach is to start by solving a ‘slice’ of the problem, use it actively, and gather feedback. This iterative approach minimizes the delays caused by excessive debate over edge cases that may never materialize. In the long term, IT is well-positioned to maintain these solutions, ensuring their longevity.

3. Risks and Skillsets

Perhaps one of the most critical factors influencing the success of these transformation projects is the skillset, attitude, and aptitude of planners. Clear leadership from the outset and effective change management are paramount. Organizations must be diligent in seeking the right skillset when hiring or promoting individuals to key roles.

Interestingly, comments were made that some organisations hire people with shop floor operations experience banking on synergies with the needs of the wider supply chain. However, it was noted that they may not always be best equipped to leverage more complex technology so a balance needs to be struck here. One particular organisation related that there is a cultural bias in accepting ‘new technologies’ and the feeling was that people would rebel against technology rollouts. There is indeed lots to unpack here.

Conclusion

In conclusion, the journey towards agile supply planning through digital twins and scenario generation is marked by a profound shift in perspective. Scenario planning has evolved from an occasional exercise to an essential daily practice, necessitating a departure from traditional Excel models. The trigger for transformation often lies in leadership buy-in, with clear direction paving the way for smoother transitions. Effectiveness is about striking the right balance between business and IT ownership, focusing on practical solutions, and iterating as necessary. Finally, the success of these projects ultimately hinges on the skills and mindset of the planners, emphasizing the need for clear leadership and careful talent management. In the dynamic world of supply chain management, digital twins and scenario generation are the pathway to agility and resilience but more focus needs to be applied on people and change management.