Digital Process Twins: The Future of Business Process Optimization

Organizations constantly seek ways to gain a competitive edge in today’s rapidly evolving business landscape. The digital twin is one of the most promising technologies in recent years. While digital twins have traditionally been associated with physical assets, their application has now extended to business processes, opening up a world of opportunities for organizations to streamline operations, enhance efficiency, and drive innovation.

Understanding Digital Process Twins

A digital process twin is a virtual representation of an organization’s end-to-end business processes. It is a living, breathing model continuously fed real-time data from various sources, such as enterprise resource planning (ERP) systems, customer relationship management (CRM) platforms, and Internet of Things (IoT) devices. This digital replica allows businesses to analyze, simulate, and optimize processes with unprecedented accuracy and granularity.

The Power of Process Visibility

One of the primary benefits of digital process twins is the unparalleled visibility they provide in an organization’s operations. According to a report by Gartner, poor data quality costs organizations an average of $12.9 million per year. By leveraging digital process twins, businesses can gain a comprehensive understanding of their processes and identify bottlenecks, inefficiencies, and areas for improvement.

Enhancing Supply Chain Resilience

In today’s volatile business environment, supply chain resilience has become a critical factor for success. Digital process twins can play a pivotal role in enhancing supply chain agility by enabling organizations to model various scenarios, such as disruptions, stock-outs, and predictive maintenance. A study by McKinsey & Company found that companies with resilient supply chains can achieve up to 16% higher earnings before interest, taxes, depreciation, and amortization (EBITDA) than their less resilient counterparts.

Optimizing Key Revenue-Driving Functions

Digital process twins can unlock value in key revenue-driving functions, such as accounts payable, accounts receivable, order management, procurement, customer service, sales operations, and logistics. Let’s explore some of the benefits in each of these areas:

Accounts Payable

• Gain visibility into payment blocks to prevent late payments and consequent delays to supplier deliveries.
• Understand where payment delays result in penalties or prevent cash discounts from being fully utilized.
• Investigate how payment term mismatches are creeping into purchase order processes and where blindspots are masking optimal payment terms.
• Improve vendor relationships by pinpointing delays and bottlenecks that are stalling efficient remittance processes.

Accounts Receivable

• Identify and model opportunities to prioritize collections earlier in the process, maximizing dunning efforts, timely payments, and cash flow.
• See where invoices are typically lost or duplicated in your accounts receivable and wider processes.
• Streamline credit review and dispute processes by highlighting unnecessary steps in escalation and approval flows.

Order Management

• Detect and correct upstream and downstream order errors, such as improper shipping labels or erroneous addresses and prices, to slash cycle time.
• Improve processing and on-time, in-full (OTIF) delivery by spotting unnecessary delivery, credit, and billing blocks.
• Investigate opportunities to automate many of the manual order management activities, such as inventory updates, generating shipping labels, and tracking fulfillment.

See how reverse logistics runs and interacts with the rest of your order management processes to reduce clashes and prevent returns from being delayed or lost.

Procurement

• Diagnose why discrepancies in purchase requisition (PR) fields are happening.
• Eliminate free text orders by making it easier to analyze the root cause of PRs lacking catalog references, so they can be correctly linked to an item and stop slowing down processing cycle time.
• Gain a clear picture of supplier lead times and any bottlenecks, so you can take action to prevent impacts to your business further down the line, including exploring alternative suppliers.
• Track emissions sources, duplicated processes impacting sustainability KPIs, and vendors not complying with your environmental, social, and governance (ESG) requirements.
• Uncover how excess stock is being purchased to lower operating costs.

Customer Service

• Identify pain points in the customer experience journey and areas where processes can be streamlined or automated to improve satisfaction.
• Optimize service level agreements (SLAs) and response times by pinpointing bottlenecks and inefficiencies in case management processes.
• Enhance self-service capabilities by understanding how customers interact with various touchpoints and tailoring digital experiences accordingly.

Sales Operations

• Analyze lead management processes to identify areas for improvement in lead qualification, nurturing, and conversion.
• Optimize quote-to-cash cycles by streamlining processes from pricing and quoting to order fulfillment and invoicing.
• Enhance sales forecasting accuracy by incorporating real-time data from digital process twins into predictive models.

Logistics

• Optimize transportation routes and schedules by simulating scenarios and identifying potential bottlenecks or inefficiencies.
• Improve warehouse operations by analyzing processes such as receiving, putaway, picking, and shipping to identify areas for automation or process redesign.
• Enhance inventory management by gaining visibility into stock levels, demand patterns, and replenishment processes across the supply chain.

Fostering Continuous Improvement

Digital process twins provide a comprehensive view of current processes and enable organizations to simulate and test various scenarios without disrupting live operations. This capability empowers businesses to experiment with process changes, identify potential risks, and make informed decisions before implementing actual changes. According to a report by McKinsey & Company, companies that effectively leverage digital twins can achieve up to 25% faster time-to-market and up to 30% lower operational costs.

Embracing Digital Transformation

Adopting digital process twins is part of businesses’ broader digital transformation journey. By embracing this technology, organizations can stay ahead of the curve and position themselves as industry leaders. A Deloitte study found that companies prioritizing digital transformation initiatives are 1.8 times more likely to report revenue growth and 1.7 times more likely to achieve cost reductions.

Challenges and Considerations

While the benefits of digital process twins are compelling, their implementation is not without challenges. Data quality and integration can be significant hurdles, as digital process twins rely on accurate and comprehensive data from multiple sources. Additionally, organizations may face cultural resistance and a lack of digital skills among their workforce, which can hinder the successful adoption of this technology.

To overcome these challenges, businesses must invest in data governance strategies, robust data integration platforms, and employee training programs. They should also foster a culture of continuous improvement and embrace agile methodologies to adapt to the ever-changing business landscape.

Embracing the Future with Digital Process Twins

As businesses navigate the complexities of the modern world, digital process twins offer a powerful tool for achieving process excellence. Digital process twins can help organizations unlock new levels of efficiency, agility, and competitiveness by providing unprecedented visibility, enabling process optimization, and fostering continuous improvement.

While the journey towards adopting digital process twins may present challenges, the rewards are significant. Organizations that embrace this technology early will gain a distinct advantage, positioning themselves as industry leaders and driving sustainable growth in an increasingly digital world.