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Körber Supply Chain Blog

19.11.2020

Logistics innovation without risk: why digital twins are so important

What could you do with the power to test technologies and operational strategies before making changes? With warehouse simulation technology, or a “digital twin”, discovery becomes as important to supply chain as moving boxes.

As warehouse operations become more complex to meet increased demand and evolving consumer expectations, supply chain managers are discovering the importance of optimizing logistics to boost efficiency and maintain profit margins. While warehouse automation has increased the bandwidth of many sites, allowing them to fulfill more consumer orders, operations essentially have to be “always on” to stay profitable.

This creates a bind for site managers. In order to optimize efficiency, warehouse technology needs to be agile enough to incorporate new developments and processes, but properly testing new methods or tools on the warehouse floor is disruptive to operations and risky.

How are companies to reconcile with this challenge? By using a digital twin — warehouse simulation allows businesses to create virtual copies of their facilities in order to test different situations and conditions. This not only avoids the need for costly shutdowns but also allows warehouse management teams to quickly test different floor plans, workflows, automation conditions, and other factors to determine how the changes affect the facility’s operational capacity and performance. By using a digital twin, companies can create optimized warehouse designs before any reorganizing or reallocating of physical assets begins.

According to McKinsey, using digital twin warehouse and logistics simulators can improve the efficiency of storage sites by as much as 25 percent.[1] This is an obvious and attractive advantage for operations leaders — and why Gartner predicts that by 2021, 50 percent of industrial companies will design their warehousing facilities using digital twins.[2] Here’s a little more about how the technology works — and how it can enhance supply chain operations across industries.

Capabilities of warehouse simulation

Different types of warehouse simulation software offer different capabilities, so it’s important for companies to choose a digital twin system that aligns with the variables they’re looking to test. Three common factors to consider are granularity, integrations, and scope.

Granularity refers to the level of detail and customization that a digital twin can provide. This may include parameters as specific as aisle width and rack height, or as large as general warehouse configuration and dimensions. Some can test individual changes in employee headcount or in the number of autonomous mobile robots (AMRs) on the warehouse floor, as well as peak performance times and improvements that could be made through adopting additional forms of warehousing technology.

Testing various “what-if” scenarios in a safe digital twin environment can help with efficiency discoveries. But this is only part of the picture. By integrating with other logistics systems, such as an enterprise resource planning (ERP) or warehouse management system (WMS), it’s possible to more accurately simulate operations — therefore creating more definite information that drives better decision-making.

While companies typically use simulations to improve warehouse efficiency, some digital twin systems allow for modeling at a larger scope for network optimization, as well. These enable companies to examine their distribution centers and transportation solutions in order to improve capacity, scale effectively, or even seek strategic partnerships with third-party logistics (3PL) providers.

Industry applications of warehouse and logistics simulators

Designing and testing virtual warehouses prior to physical implementation offers efficiency benefits for companies across the supply chain, regardless of their role. For instance, 3PLs can use digital twins to calculate the necessary throughput and resources for various product types and determine whether multi-tenant occupancy is feasible with a tender’s existing distribution centers. This allows 3PLs to examine the profitability and fit of potential partnerships before negotiations are finalized.

Retail is another industry that stands to benefit from the use of warehouse simulation. Many retail markets are extremely competitive and operate at low profit margins, which makes digital twins an efficient way to demo different scenarios in order to identify which additional resources or strategies are needed to optimize workflow, processes, and spatial design. Manufacturers can use warehouse simulators to model optimal production output versus warehouse throughput to avoid over-producing inventory — or to gain a better understanding of what resources are needed to fortify a business’ ability to operate efficiently.

Regardless of the specific industry application, using warehouse simulation software has been shown to lower operational expenses, improve productivity, and reduce capital expenses in the long run. By identifying and eliminating bottlenecks, digital twins are enabling companies to create a more efficient and effective supply chain for tomorrow.

Learn more about digital twin technology in our full article.

 

Sources:
[1]https://www.mckinsey.com/business-functions/operations/our-insights/improving-warehouse-operations-digitally
[2]https://www.gartner.com/smarterwithgartner/prepare-for-the-impact-of-digital-twins/
 

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