Procurement priorities in 2024 are shifting. Prior to the COVID-19 crisis, pure profit motivation led to exceedingly long, widely distributed, complex, and fragile value chains. In the last four years, however, the world has begun to realise that the endless succession of geopolitical disasters, climate catastrophes, and once-in-a-generation economic hiccups isn’t going away any time soon. As a result, organisations are increasingly pivoting their priorities towards a more balanced approach.
Not only must procurement maintain cost-containment in uncertain economic times, and (more and more) be a driver of strategic and sustainable innovation for the business, but CPOs in 2024 find themselves at the the forefront of companies’ risk management strategies as well.
According to an Amazon Business report, when it comes to the top activities procurement leaders recognise the need to invest time and money into, “technology and tools to increase efficiency” (36%) and “taking steps to mitigate risks in the face of economic or geopolitical challenges” (35%) comfortably claimed the top spots.
Considering “many of the top risks identified by respondents have the potential to disrupt procurement operations with little warning,” procurement leaders looking to drive innovation, improve efficiency, and increase their ability to anticipate and mitigate risk are exploring the potential of digital twins.
Digital twins in procurement?
A digital twin is a virtual replica of a physical object, organisation, person, or process. This digital duplicate enables users to test and predict behaviour in different hypothetical situations. Organisations in the manufacturing industry have been using digital twins for years to facilitate iterative prototyping. More recently, however, the technology is increasingly being paired with AI and machine learning. As a result, digital twins can track and model more complex systems than ever before.
A digital twin designed to track a procurement process or supply chain is called a network twin. Supply chain leaders have hailed digital twins as a useful tool for monitoring and testing logistics networks and supply chains. However, the technology is still underutilised in procurement. A report by Gartner found that 60% of supply chain leaders were planning to invest in digital twins. While that is a high number, it is still noticably smaller than in other fields like industrial manufacturing and logistics. A report by McKinsey found that “70% of C-suite technology executives at large enterprises are already exploring and investing in digital twins.”
The lack of applied analytics to digital twins in procurement may be partially responsible for the slower pace of adoption. Steve Kyle, a consultant for Deloitte, notes that “dynamic visibility” has the power to transform supply chains. This is only true, however, he stresses, when analystis translate that visibility “into recommendations and actions.”
Digital twin readiness in the procurement sector
Adopting digital twins is a complex and potentially fraught process. Nevertheless, Kyle explains that much of the building blocks that would enable a successful and widespread deployment of the technology in the procurement sector are already available to most procurement leaders.
These “enablers required to implement digital twins,” include “highly scalable computing power and storage, availability of historical data, advanced algorithms, ability to integrate external data, and the technologies to make sense of it all.” Many, if not all of these key tools, he notes “are already available and being used.”
Digital twins bring the capacity for long term planning, disruption detection, integrated business planning, and increased resilience to the procurement process, but Kyle points out that CPOs and CSCOs struggle with finding the right tools, getting the timing right, and articulating the value that a large investment like a digital twin (and the necessary analytical tools to unlock its potential) demand.
