One of the best things about my job is that I get to talk to leaders across industries about how they leverage their supply chains to drive growth with customers. Their stories offer inspiring lessons about the path forward, especially in the area of emerging technologies. Digital twin of the customer (DToC) is one of those technologies that leading companies are piloting. Gartner classifies DToC as an emerging technology system that is “transformational,” meaning it has the potential to establish new ways of doing business within and across industries, resulting in major shifts in industry dynamics.
What is a Digital Twin of the Customer?
Consider the impact of not being able to properly forecast customer expectations for new products or services, predict upside or downside demand variations or align supply to demand risk. One solution to these challenges is to leverage a DToC. In the same way that a digital twin of a product enables organizations to anticipate how that product will perform or will need to be maintained in different conditions, CSCOs can use DToCs to simulate how a customer will react, given a specific set of ecosystem parameters, conditions and control or input signals. This ability to simulate customer reactions in real time will allow supply chains to better sense changing customer demands, predict scenarios for response and accelerate the time to value for new products and services.
While some benefits of the DToC can be delivered in isolated use cases, the real value of the DToC for supply chain is in the integration with another digital twin — the digital supply chain twin (DSCT). A physical supply chain is made of several things, from factories to assets, from distribution centers to products, from suppliers to employees. The integration of the relevant data from the individual twins of those supply chain components feeds into a DSCT. The integration of the DToC will provide more complete, accurate, real-time simulations and predictions of customer likes and dislikes as input to the DSCT. The DSCT will use these inputs to simulate a variety of supply responses, test them on the DToC and provide an optimized response for the customer. This end-to-end integration of DSCT with DToC will enable better, faster decisions and deliver a more personalized, customized set of supply chain responses.
However, our research shows that while 60% of surveyed CSCOs indicated that they are currently piloting or planning to implement DSCT, that percentage drops to 27% for DToC. We believe the opportunity for transformational benefits from the DToC far exceeds the potential that most CSCOs see today. Ultimately, DSCTs that do not integrate a DToC will be limited in the ability to support CSCOs with adequate decision making and will be disadvantaged in driving growth.
What Are the Benefits?
To learn more about DToC, we interviewed 10 of our top customers, and surveyed 380 senior supply chain leaders. At the outset, we wanted to establish what CSCOs were being asked to deliver as a result of their digital supply chain strategies. The idea being that any new digital technology would need to support the delivery of these strategic outcomes. The top three business drivers for a digital supply chain strategy are: customer experience (63%), reducing costs (61%) and innovating supply chain services to support growth (51%).
In this same survey, we asked CSCOs about the expected benefits of a DToC. The top expected benefits are improved demand-forecast accuracy, improved supply chain agility and response and improved customer experience. So, the benefits from a DToC align well with the required outcomes of a supply chain digital business strategy and support the business case for the inclusion of the DToC into the SC digitalization roadmap.
What Are the Barriers?
Accelerating the development of DToC starts by understanding and mitigating the barriers. Given the newness of the technology, the barriers are many. The top challenges are mainly related to lack of digitalization skills and lack of customer trust in sharing data, while internal culture and inability to craft the business case are seen as lesser challenges.
In our interviews, clients told us that the biggest barrier they face in realizing DToC is not the technology — it’s the people skills and cultural transformation. This indicates that some organizations may be underestimating the priority of the cultural transformation the DToC requires.
Although a nascent technology, DToC has the potential to be transformational. Leading organizations are already leveraging customer data to simulate demand and optimize response scenarios. The next phase will focus on building on these lessons to digitize and orchestrate end-to-end cross-enterprise processes. A robust strategy for piloting and scaling DToC must be part of the supply chain digital roadmap. This will support delivery of the required business outcomes: enhanced CX, reduced costs and innovation of supply chain services to support growth.
If you would like to learn more about the benefits and barriers to implementing a DToC, and review example use cases from companies such as Lenovo, Procter & Gamble, Cisco and Siemens, you can read our Supply Chain Executive Report: Drive Growth & Elevate Experiences With Digital Twin of the Customer (subscription required).
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Sr Director Analyst
Gartner Supply Chain