5 minute read 6 Aug 2020
Intermodal train curving by Brule Lake

How to navigate supply chain disruption with digital process mining and digital twins

Authors
Sachin Lulla

EY Advanced Manufacturing & Mobility, Global Digital Strategy & Transformation Leader

Internet of Things strategist. Digital influencer. Sector-focused thinker. Keynote speaker. Proud husband and father.

Sven Dharmani

EY Global Advanced Manufacturing & Mobility Supply Chain Leader

Passionate about transforming supply chains. Problem solver. Curious and collaborative. Avid traveler, scuba diver and car enthusiast.

5 minute read 6 Aug 2020

Using digital process mining and digital twins can boost your supply chain resilience in a post–COVID-19 world.

It’s tempting to consider COVID-19 as a one-off catastrophe and imagine that, by this time next year, everything will be back to normal. But if there is one thing we have learned the past few months, it’s that the global economy is surprisingly delicate: 94% of Fortune 1000 companies have reported some kind of supply chain disruption stemming from COVID-19.1

The truth is that sooner or later we should expect more unexpected disruptions. Since 1987, the world has gone through at least four major financial crises. Dozens of large-scale natural and man-made disasters have also struck: floods, hurricanes, tsunamis, volcanoes, commodity price shocks, nuclear accidents and wars. In a 2019 survey, more than 50% of respondents from companies in 76 countries experienced a supply chain disruption event over a 12-month period.2

Market savvy and experience used to be enough to compensate for many of these more-common disruptions, but these days few supply problems can be so neatly contained. Today’s supply chains are more webs than chains, and by their nature, such systems tend to have multiple vulnerabilities. In the event of a border closure, for example, complex components assembled in multiple stages on both sides of a frontier may hold back a single production line multiple times.

The good news is that a new set of digital tools is available that can make your supply chain more resilient in the face of unexpected change: digital process mining (DPM). DPM allows you to map your business processes in extensive detail, giving you greater visibility into your supply chain (often with real-time information on the flow of cash and materials) and a deeper understanding of its interdependencies. A good DPM toolkit can enable you to strengthen areas where you see vulnerabilities and to make more informed decisions about how to respond when disruptions occur.

This set of tools leverages a company’s data — such as enterprise resource planning (ERP) and inventory management systems — to perform a fact-based analysis of the different business processes. The cloud-based tools follow the company’s data and generate value-stream mappings and look-back analyses. These can facilitate deeper assessments of the historical performance of a supply chain’s value streams, from order-to-cash to procure-to-pay. This picture can be further enriched with added intelligence from external vendors, such as satellite photos of ship arrivals and departures at various ports.

DPM can help boost resilience in several ways:

1. Greater visibility

DPM can cut the time spent on manual analysis by 90% by consolidating supply chain data to a single screen. DPM gives you a bird’s-eye view of the processes your entire supply chain runs on, making it possible to identify problems early, long before you start getting frantic calls from your loading docks.

2. Heightened managerial confidence

Real-time data can reassure managers that more of the parts they need are on their way, limiting the number of decisions based on gut instinct, such as personal biases about a particular supplier or business unit, and reducing the impulse to hoard at the unit level.

3. Faster throughput

Customers also frequently benefit from a strong DPM initiative. Within three months of a DPM engagement led by an EY team, for instance, the on-time delivery of one of our Fortune 500 clients for its top customers improved by 20%.

Perhaps most important, the visibility gained through DPM gives you a better way to visualize your entire supply base, providing you with a single source of truth that can help ensure that your team’s debates stem from the same set of facts.

Meet your digital twin

DPM can also be a key enabler in building a digital twin of your supply chain. A digital twin allows you to spot potential issues before they happen, rendering it a “must-have” for an efficient – and resilient – supply chain.

As described in-depth in an earlier article, How digital twins give manufacturers a real-world advantage, a digital twin is a freestanding model of the supply chain that can be based on processes mapped by DPM. Once this model is in place, the supply chain strategist can experiment with a number of key variables, testing different scenarios and contingencies.

The most effective digital twins should run on the latest data. Decision-makers can run scenario analyses in a real-time context and confidently assess how supply chains would be impacted by one or more contingencies. Based on this assessment, they can proactively mitigate risks before they impact the supply chain, whether those risks stem from everyday occurrences such as stock-outs, more dire situations such as natural disasters or even “black swan” events such as the current COVID-19 pandemic.

No one can deny the present crisis has had far-reaching effects on supply chains the world over. Businesses not only have to contend with how to navigate the present; they need to determine how to return to a new state of normal. It’s unlikely anyone can pick up where they left off before the pandemic began. Manufacturers need to plan for the now, next and beyond. A digital twin can help manufacturers plot a course and steer around potential obstacles. It can also help build a more resilient supply chain to fortify against future disruption.

With a digital twin, simulations can be run by changing different variables to visualize the full impact of any number of scenarios, such as supplier insolvency, production shutdowns, shipment delays due to shipping port congestion or a sudden spike in product demand. This provides decision-makers with an ability to assess the impact of these challenges and help them to identify backup options, including using alternate suppliers, using alternate shipment modes, and increasing inventory levels to avoid disruptions to their supply chains

Clearer insights into your supply chain’s possible pain points will make it easier to minimize vulnerabilities generally or, if you are already in the midst of a disruptive event, to see the different ways in which knock-on effects might manifest themselves before they happen.

Having a digital twin may also help condition supply chain leaders to think more strategically. The surprisingly strong performance in February and March of companies that have practiced supply chain war games and other tabletop exercises suggests that simply making a habit of taking a strategic view can help drive stronger performance during a crisis.

Looking ahead

Operations may remain challenging even after we get back to normal — whatever normal turns out to be — but fortunately there are more advanced technologies to help meet the challenges ahead. DPM and digital twin technologies are powerful new toolkits that even the most complex 21st-century businesses can incorporate, both in their daily resource management and long-range strategy.

Summary

COVID-19 is unlikely to be the last disruption to the global economy. A new set of digital tools — DPM and digital twins — can make your supply chain more resilient in the face of unexpected change. Using DPM, decision-makers can run scenario analyses to confidently assess how their supply chains would be impacted by certain events. Also building a “digital twin” of a supply chain can help spot potential issues before they happen — making it a “must-have” for an efficient and resilient supply chain.

About this article

Authors
Sachin Lulla

EY Advanced Manufacturing & Mobility, Global Digital Strategy & Transformation Leader

Internet of Things strategist. Digital influencer. Sector-focused thinker. Keynote speaker. Proud husband and father.

Sven Dharmani

EY Global Advanced Manufacturing & Mobility Supply Chain Leader

Passionate about transforming supply chains. Problem solver. Curious and collaborative. Avid traveler, scuba diver and car enthusiast.