Saturday, 22 April 2023

Digital Twins in Supply Chains ~ how do we use them and unlock their potential

Digital Twins in Supply Chains ~ how do we use them and unlock their potential

A brief guide for companies to optimize their supply chain functions by unlocking the potential of digital twins

Prof Archie D’Souza

(Source: Google)

Since the start of this millennium myriad industries have started adopting digital twin technology. It’s a revolutionary technology that has become more accessible and affordable. Still, it remains underutilized in supply chains, way below the potential it has. Why does this happen? The main reason has been attributed to the complex nature of supply chains. However, according to me, the reason is the reluctance of logistics players to adopt it. Misunderstandings about the technology’s applications, capabilities, and potential value has been a common excuse. This may be partially true. What prevents the players from getting experts and starting its adoption on a pilot basis? I feel that immense benefits across a wide range of supply chains can be delivered with a proper adoption and implementation strategy.

Let’s, to begin with, look at what digital twins are. A digital twin is a digital representation of a physical object, process, service, or environment that behaves and looks like its counterpart in the real-world. [source: https://www.twi-global.com/technical-knowledge/faqs/what-is-digital-twin], e.g., a digital replica of an object in the physical world, such as a missile, jet engine, or computer chip. Items could be tiny or exceptionally large, and could include buildings, manufacturing plants, townships, or even entire cities. Digital twin technology can also be used to replicate processes in order to collect data to predict how they will perform. So, in essence, a digital twin is a computer programme that uses real world data to create simulations that can predict how a product or process will perform. The beauty about these programmes is their ability to integrate IoT, artificial intelligence and software analytics to enhance the output.

These virtual models have turned out to be a staple in modern engineering to drive innovation and improve performance. For this we need to thank the advancement of machine learning and factors such as big data. Creating such a model can allow the enhancement of strategic technology trends, besides preventing costly failures in physical objects; additionally, by using advanced analytical, monitoring, and predictive capabilities, test processes and services. The prospects are numerous.

Digital Twins – Distinguishing Characteristics

Digital twins, as we’ve seen, are virtual replicas of physical entities and their interactions. They consist of a combination of enabling technologies and analytics capabilities. However, very often the technology is misunderstood. It is assumed by many that digital twins are themselves sensors, 3D models, simulators, or applications of AI technology. This assumption is erroneous. Also, some mistakenly consider digital twins to be largely theoretical and hence, not relevant for supply chain management. It is also often assumed that a digital twin can be built only after the physical twin has been created. None of these assumptions is true.

As stated, digital twins are a combination of multiple enabling technologies, e.g., sensors, cloud computing, AI & advanced analytics, simulation, visualization, and augmented & virtual reality, to name some of them. A customised mix of technologies is used depending on the individual user’s needs and expectations. One of the most distinguishing features of digital twins is their ability to emulate human capabilities, support critical decision-making, and even make decisions on behalf of humans, a feature that makes them so powerful. Digital twins observe their physical environment through a network of sensors that dynamically gather real-time data. By learning from this information, they evolve, and it isn’t just the information but also the contexts. They keep interacting with humans, devices, and other networked digital twins. These capabilities make them active social tools, it enables them to continuously communicate and collaborate with their associated physical and digital objects and also with humans. The technology supports end-to-end visibility and traceability, so essential in supply chains. Thus, supply chain practitioners can spot patterns of overly complex and dynamic behaviour.

Another feature of digital twins is their ability to build nonlinear supply chain models by overseeing many internal and external moving parts in end-to-end supply chains. They can thus compute thousands of what-if scenarios. The technology learns from these decisions and gains in maturity over time. Managers thus can make faster, more accurate, and better-informed decisions. This obviously has a long-term impact with the added bonus of considerably lower costs.

Digital Twins – their Working  

Digital twin are virtual models designed to accurately reflect physical objects. To cite an example, a jet engine is various sensors related to vital areas of functionality are fitted to it. The fitted sensors produce data about different aspects of performance of the physical object, such as energy output, temperature, weather conditions and more. This data is then relayed to a processing system and applied to the digital copy. Once the data is obtained, simulations can be run using the virtual model. Not just that, it’s even possible to study performance issues, and come up with improvements. Once these valuable insights are obtained, they can be applied back to the original physical object.

Differences between digital twins & simulations: Are simulations and digital twins the same? Or are they different? Let’s examine. Both utilize digital models to replicate a system’s processes. A digital twin being a virtual environment, is far richer for study. So, what’s the difference? It is largely a matter of scale. Simulations typically study a particular process. A digital twin, on the other hand, can itself run several useful simulations to study multiple processes. That’s not all. Does one see simulations benefiting from having real-time data? No! The beauty of digital twins is that they are designed around a two-way flow of information. A flow that first occurs when object sensors provide relevant data to the system processor. It happens again when insights created by the processor are shared back with the original source object. Digital twins can study more issues from far more vantage points than standard simulations can perform many tasks. They do this by having better and constantly updated data related to a wide range of areas. This, combined with the added computing power that accompanies a virtual environment, gives is greater ultimate potential to improve products and processes.

Types of digital twins: Digital twins are of different types depending on the level of product magnification. The area of application is the biggest difference between these twins. It isn’t uncommon to see different types of digital twins co-existing within a system or process. Let’s look at some of these types. This will enable us to learn the differences and how they are applied.

1.      Component twins may be looked at as the basic unit of digital twin. They are the smallest example of a functioning component.

2.      Parts twins pertain to components of slightly less importance. But for that they are the same as component twins.

3.      Asset twins: Two or more components work together form what is termed as an asset. Asset twins let a person study the interaction of those components. In the process, they create a wealth of performance data that one can process and then turn into actionable insights.

4.      System or Unit twins are the next level of magnification. They enable one to see how different assets come together to form an entire functioning system. These twins provide visibility regarding the interaction of assets. Therefore, they may suggest performance enhancements.

5.      Process twins, the macro level of magnification, reveal how systems work together to create an entire production facility. They enable a person to judge whether those systems all synchronized to operate at peak efficiency, or whether delays in one system will affect others. With process twins one can help arrive at the precise timing schemes that ultimately influence overall effectiveness.

Digital Twin Technology – a brief history

American computer scientist David Gelernter was the first person to come up with the idea of digital twin technology. He did so in 1991, in a book he authored Mirror Worlds. However, the person who first applied it in manufacturing was Dr Michael Grieves, a faculty member at the University of Michigan.  He did so in 2002, formally announcing the digital twin software concept. Eventually, NASA’s John Vickers introduced a new term digital twin in 2010.

The term may have been conceived as late as in 2010, however, the core idea of using a digital twin as a means of studying a physical object dates back several decades before that. One can rightfully credit NASA with pioneering the use of digital twin technology during its space exploration missions of the 1960s. At that time, each voyaging spacecraft was exactly replicated in an earthbound version that was used for study and simulation purposes by NASA personnel serving on flight crews.

Digital Twins - advantages & benefits

Nancy White, a content marketing strategist for the Corporate Brand team at PTC has written a very interesting article entitled Top 8 Digital Twin Benefits.                         [see: https://www.ptc.com/en/blogs/corporate/digital-twin-benefits ]. Some of the points she makes are listed out below.

Better R&D: It’s use enables more effective research, especially if it involves designing new products. This is because an abundant amount of data is created, about likely performance outcomes. The information created leads to insights that help companies make needed product refinements even before starting production.

Greater efficiency: Digital twins can help mirror and monitor production systems even after a new product has gone into production. It’s done with an eye to achieving and maintaining peak efficiency throughout the entire manufacturing process.

Product end-of-life: Manufacturers can decide what to do with products that reach the end of their product lifecycle and need to receive final processing, with the help of digital twins. This is done through recycling and/or other measures. Digital twins help in determining which product materials can be harvested.

Digital Twins in Supply Chains

Before we look at the working of digital twins in supply chains, let’s look at how they work in manufacturing. Digital twins do offer a great deal. Some of their features are prized. However, their use may not be warranted for every manufacturer or every product created. We’ll see why. Not all objects are so complex as to require the intense and regular flow of sensor data that are a must for digital twins. Also, it may not always be financially feasible. A great deal of resources is required to create them. As a digital twin is an exact replica of a physical object,  its creation is expensive.

According to anyLogistiz.com a Supply Chain Digital Twin is a detailed simulation model of an actual supply chain which uses real-time data and snapshots to forecast supply chain dynamics. From this, analysts can understand a supply chain’s behaviour, predict abnormal situations, and work out an action plan. [see: https://www.anylogistix.com/features/supply-chain-digital-twins/ ]

A supply chain digital twin can be used for:

·    Understanding supply chain dynamics and behaviour

·    Bottleneck discovery

·    Testing supply chain design changes and development

·    Monitoring risk and testing contingencies

·    Transportation planning

·    Inventory optimization

·    Cash to serve and cost to serve analysis

·    Forecasting and testing operations over the coming days and weeks

By clicking on the link above you will get access to a white paper which investigates how digital twins and control towers are resolving challenges in the supply chain. Read the white paper and estimate the value digital supply chain twins can offer your business!

https://www.mckinsey.com/capabilities/quantumblack/our-insights/digital-twins-the-key-to-unlocking-end-to-end-supply-chain-growth  

[To be concluded]

[The subject is wide and cannot be covered in such a short space. Please read Part Two (to be published soon) for more] 

Tuesday, 28 March 2023

An Introduction to the Use of Blockchain Technology in Supply Chains

 An Introduction to the Use of Blockchain Technology in Supply Chains

Main Takeaway

A technology which started out as a ledger for bitcoin transactions is now finding use in numerous other applications. Here we look at their applications in Supply Chains and Projects. This blog is a teaser to the book I’ve co-authored with Suresh Iyer ~ Simplifying Blockchain Complexities in Projects and Supply Chains.

Blockchain Technology is over twenty years old. Yet, it continues to be a source of intrigue to users and potential users in the global business community. Many corporate honchos I’ve met insist that they’re still unable to find out any revolutionary feature in the technology. Data managers call it an overhyped fantasy which they say has no utility which is likely to cause more harm than good. I beg to differ with all of them. Also, I’m sure and it’s absolutely certain that blockchain technology is here to stay. No one can stop its march forward.  Its will continue its advance in myriads of areas especially where supply chains and projects are concerned.

Proponents of blockchain technology state that its basic concept is quite easy to grasp. According to Luke Conway it is essentially a means of data storage that organizes data into blocks that are then linked into a chain. [Source: Blockchain Facts: What Is It, How It Works, and How It Can Be Used (investopedia.com)]. We shall look here at how it works.

New data that is received is entered into a new block. It’s never rewritten over the old. Thus, a permanent, immutable ledger of past events that can be viewed in chronological order is generated. Blockchain technology has so far been used mainly for storing financial records. It can, however, be used for several other applications like projects, supply chains, travel records and legal documentation, across sectors and industries. Many of them have started experimenting with distributed ledgers, which blockchains are.

Concerns About Security of Blockchains

A question often asked by potential and new users is ~ what would stop hackers from altering previous blocks in a chain? The answer is that unlike most digital ledgers that are centralized on a single, hardened server, blockchains are decentralized across numerous, very often thousands, of servers. A lot of users may consider this to be a security manager’s nightmare. Is it? Let’s examine. The technology is in fact quite resourceful and innovative. Every time there is an attempt to add a new block to a chain, all the participating servers will compare theirs and other servers’ records. Any mismatch will result in the chain being put on hold and cancellation of the transaction, pending further examination. So, for a hacker to illegally alter a block they would have to break into thousands of servers and make all changes simultaneously, a well-neigh impossible task. The main advantage of blockchain technology is that no central authority holds dominion over the ledger, allowing users to apply it across a wide range of applications.

Before we look at supply chains and projects, let’s look at a few examples from elsewhere. Imagine a scenario in which a person wishes to purchase something online but can’t transfer money because the bank’s network is down. When the private ledger of the bank is used the buyer can’t make payment. However, if they use blockchain technology, the customer could use a credit card, a store credit, or some other mechanism through which they can access the user’s blockchain. This is perhaps the main reason why blockchain technology has become a favourite for user of digital currencies like bitcoin. Here, the absence of central control means the exchange of bitcoins cannot be subverted towards their own ends.

The technology has so many applications. Why then hasn’t its commercial applications become universal, despite its introduction close to fifteen years ago? October 2008 was when it was introduced. It should have by now garnered a far larger share of the digital ledger market. While its use in cryptocurrencies is significant, many organisations are still cautious about its efficacy. With regard to players in the supply chain sector most players, especially value-sucking, high-cost intermediaries like freight forwarders look at the transparency that blockchains provide as a threat to their very existence. Therefore, its use has been limited to a handful of pilot projects, with no enthusiasm of welcoming it into core business applications.

A 2017 article in the Harvard Business Review by Marco Iansiti & Karim R Lakhani entitled The Truth About Blockchain says in its subtitle “It will take years to transform business, but the journey begins now.” [see: https://hbr.org/2017/01/the-truth-about-blockchain#:~:text=Blockchain%E2%80%94a%20peer%2Dto%2D,transferring%20ownership%2C%20and%20confirming%20transactions. ] The article states that “Contracts, transactions, and records of them provide critical structure in our economic system, but they haven’t kept up with the world’s digital transformation. They’re like rush-hour gridlock trapping a Formula 1 race car. Blockchain promises to solve this.” It then goes on.

 

 

 

 

The article lists out a describes the “five basic principles underlying the technology” which I’ve quoted below. They are as follows:

1.    Distributed Database

Each party on a blockchain has access to the entire database and its complete history. No single party controls the data or the information. Every party can verify the records of its transaction partners directly, without an intermediary.

2.    Peer-to-Peer Transmission

Communication occurs directly between peers instead of through a central node. Each node stores and forwards information to all other nodes.

3.    Transparency with Pseudonymity

Every transaction and its associated value are visible to anyone with access to the system. Each node, or user, on a blockchain has a unique 30-plus-character alphanumeric address that identifies it. Users can choose to remain anonymous or provide proof of their identity to others. Transactions occur between blockchain addresses.

4.    Irreversibility of Records

Once a transaction is entered in the database and the accounts are updated, the records cannot be altered, because they’re linked to every transaction record that came before them (hence the term “chain”). Various computational algorithms and approaches are deployed to ensure that the recording on the database is permanent, chronologically ordered, and available to all others on the network.

5.    Computational Logic

The digital nature of the ledger means that blockchain transactions can be tied to computational logic and in essence programmed. So users can set up algorithms and rules that automatically trigger transactions between nodes.

Unquote


Why then does this hesitation for full-scale adoption even exist? Decision makers in freight forwarding and customs broking companies, as well as lack of trust, governance, and risk issues. There is also the need for compliance legislation. Contracts in India come under the India Contract Act 1872, a legislation that’s over 150 years old. Either a new act is needed or the existing one should be amended so smart contracts may be made legal. A blockchain architect may get caught into several compliance situations and concerns.

Another common complaint against or objection to the technology is that being a centralised ledger, are they able to create reliable software to repair bugs and launch new services? They say that with proprietary software, at least one could call someone when things go wrong. With blockchain technology, no one is in charge. Therefore, it becomes very difficult for users to fix things when they go wrong. With centralised networks of computers and programmers, there are centres and people available to set things right when they go wrong. No so with decentralised networks, where the absence of an authority not only makes it difficult to say that a flaw needs to be fixed but also spotting the flaw itself.

Blockchains and the Law

There are two aspects of the law which need to be sorted out as far as applications of blockchains and smart contracts are concerned – criminal and civil. Let’s start with criminal. The law enforcing authorities keep stating that democratization, which is what blockchains are all about, is proving troublesome for those involved in policing. Law breakers can easily and effectively be shut out of any centralised, regulated community. However, it isn’t as easy with the leaderless blockchain. They insist that it has become a haven for black-marketers and money launderers and have cited many examples. The dark net or dark web is an example most cited. [see: What is the dark web (darknet)? – TechTarget] Since 2014 they state the dark net has continued to utilise blockchain technology for a wide range of licit and illicit purposes. [see: What is the Darknet? - Definition from Techopedia] Not all blockchains are alike. This is an important aspect of blockchain technology that is often overlooked. Software packages come in a wide variety of designs and myriad approaches to implementing them. Also, their applications are numerous. But, breaches have taken place. Most of them are the result of bugs introduced due to faulty implementation.

The Future of Blockchain Technology in Supply Chains & Projects

https://hbr.org/2020/05/building-a-transparent-supply-chain

Players in the supply chain sector will say that today there just isn’t a clear consensus on where blockchain technology fits. To some it is the very distant future, to others it has already been around for decade and a half and therefore is an artifact of the past. One of the reasons for reluctance in its introduction is the fact that the world economy itself is in such flux. In my opinion it is because many a value-sucking intermediary would stand to lose when transparency is introduced.

In trade, whether domestic or international, goods and services flow from seller to buyer while money flows in the other direction. Flowing in both directions is information. There are several players involved in a movement and transactions, more if it involves crossing of international borders. While we focus our discussion on the movement of goods, the same principles apply to movement of services as well. Besides players involved, there are very clear-cut steps that shipments have to go through and services to be purchased. In the process, several documents, many of them contracts, are generated. By looking at the dynamics of a typical movement let’s see how blockchains can help. 

As an example, we’ll look at an institutional buyer and seller, from two different companies, transacting business. The two countries have their own set of laws and regulations but, the companies doing business are also bound by international law. The buyer may refer to a catalogue to find out what products the seller has on offer and may then negotiate on the price and terms. A contract for sale and purchase may be entered into or the buyer may prepare a purchase order. The buyer could also send out a request for quotations (RFQ) and choose the seller who offers the best price and terms. The terms of payment could be a documentary letter of credit (LC). So, what we see are different types of documents and contracts that need to be an essential part of the transaction.

All necessary documents according to the requirements of the country of origin, transhipment and destination must be completed and checked.  Where applicable, the necessary endorsements must be made.  The players and service providers need to have an idea of documentation and policy & procedures.  Carriers may have their documentary requirements, and these have to be complied with.  Certain documents are required prior to and certain others subsequent to carriage.  Some of the subsequent docs may need to be prepared prior to carriage and either accompany the AWB or be couriered to the consignee.  Wherever electronic docs are accepted, the need for paper docs is eliminated.  We now know, for a fact, and need to repeat here, that that international trade and all transactions in connection with it generate a host of documents, some of them contracts.

A contract between a buyer and exporter always specifies that various documents to be submitted by the exporter covering shipment of related goods.  Payment for the export is made by the importer, through banking channels, based on documents presented by the exporter.  Quite often, as already stated, the export transaction is backed by an irrevocable letter of credit (LC) issued by the bank on behalf of the importer in favour of the exporter.  It’s good for the exporters and importers to know the dynamics of LCs. In transactions involving LCs, the exporter gets payment only after submitting documents complying with the terms and conditions of the LC.  Besides the transportation docs, like air waybills or bills of lading, other docs may be required which are divided into the following categories:

·         Shipper’s Instructions for carriage

·         Customs documents

·         Documents required due to the nature of goods

·         Documents certifying quality or quantity

·         Documents required for payment purposes

·         Documents that enable the importer to avail of import duty concessions

Let’s look at its working. We start from the time the buyer places a purchase order or signs a contract of sale and purchase with the supplier. The purchase order or contract will state the terms of trade and terms of payment. We will look at three possible scenarios with regard to terms of payment – advance payment, open account, and LC. The players involved in this transaction besides the buyer and seller are the banks in which the two players have their accounts.

When the seller is preparing for shipment, they need to prepare an invoice and packing list, other documents like a certificate of origin may be required in certain cases, the list is endless. In case of LCs, the seller needs to prepare a pro-forma invoice and send it to the buyer. The latter hands it over to their banker along with an application. The banker will then, after certain conditions are met, issue an LC which will be forwarded to the seller’s bank. To complete the shipment, the seller and/or buyer may use the services of a forwarder and/or customs broker. At every stage documents and contracts are prepared. During the paper era, these processes took weeks, with electronic documentation and payment, this has been reduced to days. Smart contracts using blockchain technology will reduce the time to minutes, if not seconds. The processes and costs too will be absolutely transparent. Payments too will be automatic.

I’ve co-authored an entire book on the subject. Do read it when it’s released.

 Prof Archie D'Souza