Optimising Supply Chains with Digital Twins

Supply chains are a brilliant use case for digital twin deployment. Their interconnected systems (inventory, production and shipment, to name a few) have real-time visibility needs for operational oversight, risk mitigation and impact analysis. 

Many stakeholders are also involved across the system, and they want to see a tightly run supply chain, with the ability to analyse for tweaks, optimise the process, and head off risks before they’re encountered. Few assist this process better than the digital twin.

Digital twins replicate a system or part of it, such as a process or specific component. 

They mimic its behaviour in a test environment, feeding in data from multiple sources, including sensors and market intelligence, to provide a comprehensive view of a supply chain’s operations. 

By modelling behaviours of the system or component, the digital twin can provide data related to adverse interactions or results at different stages of the pipeline that the real system would experience, which might impact the supply chain as a whole.

Behaviour modelling can take the form of 3D spatial data or augmented reality, allowing a moving shot of a scenario which would otherwise be hard for humans to visualise without the help of a digital twin. 

Whereas traditional planning methods don’t offer the ability to respond quickly enough to rapidly changing conditions, the digital twin allows those operating the real system to grapple with any problems quickly and deal with them before they arrive or in time to reduce the cost impact.

Another winning feature of the digital twin is that it’s continuously learning from the processes to which it’s applied, allowing it to build on knowledge for future impact analyses or adjustments. 

The rate of digital twin adoption is already high. 86% of companies are investing in technology to respond to disruptions to their processes, which, on average, cost 45% of profits. And, as of 2022, 70% of technology leaders are actively pursuing or allocating resources to digital twins.

Many business execs are now clued into the benefits of digital twins for their operations, too. Over 42% from a wide range of industry verticals said they are aware of the advantages of the technology, and 59% plan to integrate it by 2028.

However, adoption rates vary between businesses of different sizes. Naturally, digital twin adoption and the infrastructure and upskilling it requires is most prevalent among large enterprises, which accounted for a staggering 70% of its revenue share in 2024.

In terms of its use case, product design and development market segments take up a large portion of digital twin revenue share, at almost 38% (2024). Demand for faster innovation and timeframes for bringing a product to market (made much more scalable through digital twin-enabled virtual product models) are key factors in the technology’s adoption. 

While there are many benefits to incorporating digital twins into the supply chain, two key metrics demonstrate their transformative impact:

1. Time-to-recover: This measures how quickly a supply chain can return to normal operations after a disruption
2. Time-to-survive: This indicates how long operations can continue before a disruption creates a significant impact

Digital twins enhance both areas by providing early warnings of this potential downtime and offering scenario planning to provide a proactive response to the issue.

Other operational improvements include:

• Real-time visibility across the entire supply network of around 30%
• An increase in decision-making speed by 90%
• Improvements to the accuracy of demand forecasts of up to 30%
• A reduction of 50-80% in delays and downtime
• Cost optimisation across multiple supply chain dimensions

The global supply chain digital twin market is already a multi-billion-dollar business and shows no signs of slowing down. In the next few years, figures suggest this will grow between 30 to 40 per cent annually, reaching $125 billion to $150 billion by 2032.

Manufacturing leads the way in this expansion, with the sector expected to see the fastest growth in digital twin adoption. This stems largely from the complex interplay of separate processes and high potential for optimisation. 

The numbers speak for themselves. In 2023, 29% of global manufacturers had introduced digital twin strategies. Today, 65% of manufacturing technology decision makers say they plan to use digital twins or similar tech in the future.

This rapid level of adoption isn’t happening by chance. Manufacturing companies, in particular, face increasing demands to cut operational costs, improve sustainability efforts, and show strong returns on investment, a challenge which digital twins are uniquely positioned to address.

In late 2024, the International Journal of Innovative Research of Science, Engineering and Technology (IJIRSET) found that digital twin implementation is positively impacting performance in practically every area of the supply chain: 

• Overall supply chain performance increased 20-30%
• Cost reduction of 10-20% experienced across supply chain operations
• On-time delivery performance increased 15-25%
• A reduction of 30-50% in the time-to-market for new products

Deloitte found that manufacturing productivity actually increased by 24% when digital twins were deployed to automate routine tasks, while the IDC reported on a 30% improvement in the cycle times of critical processes among organisations using digital twins in their supply chains.

Also mentioned in the journal is a study by McKinsey, which found that digital twin inventory optimisation led to a 15-30% reduction in inventory costs and a 5% increase in revenue. 

Finally, research by Boston Consulting Group indicated that companies with robust supply chains - an area in which digital twins play a key role - achieve a 7% higher growth rate compared to similar companies.

Despite these positive claims, digital twin technology is only as good as the strategy behind and execution of it. 

Gartner analysts warn that, in supply chains, 60% of digital initiatives may fall short of their value targets by 2028 if there isn’t sufficient investment in the planning and implementation of the technology, as well as the skills needed to run it. 

Digital twin technology is evolving rapidly. One major development on the horizon, on track to revolutionise its potential, is its wider integration with the Internet of Things.

By 2028, 94% of IoT platforms are expected to integrate digital twin features, opening up new opportunities for businesses to monitor their real-time operations and improve decision-making even further.

This digital twin and IoT connectivity also offer an improved outlook for sustainability-conscious organisations, who can use this technology to track their carbon footprint and optimise their processes to reduce waste and lower fuel consumption from production and logistics. 

In fact, digital twins are increasingly being deployed across the full product lifecycle to support sustainability initiatives, with 57% of organisations using digital twins specifically to meet their sustainability goals.

Blockchain-based digital twins are another recent development in supply chain management. The blockchain model provides enhanced data security, traceability and integrity to digital twin data, allowing businesses to keep secure records of operations such as product journeys and identity verification.

All the opportunities presented come at an important time. Globally, supply chain digitisation is becoming more complex and interconnected. As this increases, digital twins will become essential to the survival of businesses through their ability to model, optimise and control these systems and avoid disruptions at all points in the pipeline.

The first step to a digital twin is collecting the right data. RS offers a full range of sensors, data logging solutions, and IoT gateways to give you the real-time visibility you need to simulate, predict, and optimise.