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Strengthen your supply chain by applying digital thread principles to your data. 

TAKEAWAYS:
● Lean Principles Drive Performance: Implement lean principles focused on material handling, transport, and inventory management is the cornerstone of cost reduction and performance enhancement.
● Metrics Enhance Comprehensive Insight: Evolve the development of metrics enabling comprehensive reporting and insights into supply chain performance, enhancing strategic decision-making.
● Integrated Redesigns Extend Beyond Silos: Shift from isolated efficiency gains to structural redesigns that improve demand-supply alignment, production, and fulfillment processes across entire organizations, significantly transforming operations post-pandemic.  

 

Applying lean principles to supply chains, especially to material handling, transport, and inventory management together has been the foundation for most cost and performance improvements for the last 30 years. Metrics, like return on working capital and inventory turnover, have been developed for comprehensive reporting of supply chain performance.

Advancements in data management, usage and integration over the last decade have broadened the sources of supply chain performance improvement from functionally siloed efficiency gains to structural redesigns that span organizations. Regardless of industry, demand-supply alignment, production, warehousing, and fulfillment functions operate much differently today than they did a decade ago, or even before the pandemic.

Why?

One dominant reason is the adoption of industrial digital thread principles in supply chain management. These principles have helped supply chain data become more accurate, valuable, and broadly deployed to drive business improvement.

A digital thread is the real-time, omnidirectional flow of richly contextualized data between and among networked or meshed supply chain nodes.

Digital threads have evolved from focusing on product data to including product, process, commercial, and logistical data across wider supply chain ecosystems, particularly in mesh networks.

Today’s supply chain professionals often observe that logistics, visibility, capacity, and inventory data drive greater business efficiency. Data are more fully monetized than ever before.

As companies revisit overall supply chain strategies, misalignments among supply chain network capacities, inventories, and information have led many companies and their supply chain partners to reconstitute their integrated supply chain operations, often beginning with their data architectures and models.

In response to these challenges, manufacturers today are embedding industrial digital thread principles and data characteristics in their supply chain operating models. These often include:

• Seamless flows
• Real-time access
• Structured collaboration
• Consistent formats
• Full traceability
• Case-based contextualization

Investments in these capabilities offset risks and enhance operational agility. For example, real-time data and advanced analytics together enable early identification of potential disruptions and provide better understanding of supply chain impacts before the event(s) occur. This is crucial for making informed, preemptive decisions.

Applying Digital Thread Principles to Supply Chain Management

Many companies have viewed digital transformation as a “one-stop-shop” solution to achieve more resilient supply chains. The same is true for the application of digital thread principles. Blindly adopting new technologies without a cogent strategy that focuses on the data and its secure, but fluid, movement between supply chain participants often produces less than optimal results.

Instead, for high-value operations, organizations must complete three steps for applying digital thread principles within and across the supply chain functions where the greatest opportunities for improvement in resiliency are thought to exist.

1. Measure and Diagnose: Evaluate current processes and identify opportunities.
2. Design and Build: Deliver results to show immediate business impact.
3. Implement and Measure (Repeat): Refine solutions through continuous monitoring and optimization.

To illustrate the application of digital thread principles, we consider two high-value supply chain operations that often determine overall supply chain resiliency:

• Demand–Supply Alignment
• Inventory Management: Material and Finished Goods

Digital Threads in Demand–Supply Alignment

Even in today’s highly integrated data environments, the timely and efficient exchange of accurate, properly contextualized demand (forecast) and supply (replenishment) data between trading partners remains a primary, sometimes elusive, goal of supply chain leaders.

Optimal demand–supply alignment maximizes on-time fill rates while reducing raw material and finished goods inventories.

Safety stocks and buffers across the supply chain may be responsibly reduced, as confidence in the accuracy of demand and supply data integration and analysis improves.

How may digital thread principles be useful in achieving these goals?

Here are some questions to ask, and suggestions to consider that are connected to the three steps for applying digital thread principles.

Measure & Diagnose:

• Seamless flows: Are demand signals received from authoritative sources without delay or modification? Similarly, are supply/replenishment triggers timely, accurate, and received into the demand–supply alignment activity without need of changes to the make the data suitable for planning purposes?
• Real-time access: Even if they are aggregated later, is access to current data available in real-time?
• Consistent formats: Is the form and content of demand and supply data consistent across all sources? That is, are units of measure and product references consistent?

Now, apply these findings to the design of data connections and flows grounded in digital thread principles.

Design & Build:

• Goal-focused design: Digital thread principles in demand–supply alignment smooth the exchange of consistently formatted, properly contextualized authoritative data to leaders of production operations and material management.
• Standardized data architectures: Adopt a unified namespace (UNS) or equivalent structure. Focus on contextualization to improve collaboration efficiency between demand and supply process owners.
• Alignment between demand–supply processes: Processes using data configured to digital thread principles are more capable of accommodating disruptions, unusual events, and other irregular operating conditions.

Remember, the hallmark of a resilient supply chain is its ability to return to regular operations.

Implement & Measure:

• Demand–supply alignment processes that encourage collaboration: To provide value, IT systems leverage contextualized data from forecasts, planning systems, capacity and production plans, logistics and warehouse management systems, and other data sources. Data flows, analysis results, action recommendations, and reports become more valuable when they leverage data procured through digital thread principles.
• Data models architected with digital thread principles: These models are better able to support demand–supply alignment processes and deliver supply chain performance goals. Keep the focus on the alignment process and desired outcomes, instead of on manipulating and managing the data.

Digital Threads in Inventory Management

A well-known operations management principle posits that production capacity, inventory, and data are interchangeable. Of course, the most efficient and valuable operations are those which maximize the value and utility of data, in exchange for optimized inventories and manufacturing infrastructures.

That proposition applies to the digital thread for optimizing inventory and streamlining the management processes associated with it, especially at the bookends of raw material (RM) and finished goods (FG).

No other core contributors to supply chain resiliency have more sources or more diverse sets of data than inventory management.

How may digital thread principles contribute to optimization of raw material and finished goods inventory across the supply chain?

Using the three steps, here are some more suggestions to consider.

Measure & Diagnose:

• Inventory management metrics: Diagnose supply chain issues and quantify weaknesses or gaps in data, its form, content, or contextualization.
• Thorough root cause analyses (RCA) of inventory excursions: Identify data and IT system operating gaps to be addressed through digital thread principles like timeliness, accuracy, and contextualization.
• RCA results: Prioritize these results for changes to data models and applications of digital thread principles to available data to drive the greatest and/or most rapid improvements in RM and FG inventory performance.

Design & Build:

• Evaluation and prospective redesign of data models: Efficient integration of digital thread principles into inventory management processes and their IT applications requires evaluation and prospective redesign of data models within the capabilities of IT systems.

Experience suggests most of the new digital thread data, or additional detail for current data, will be directed toward contextualization, since inventory management performance issues often result from incomplete data models or incorrect ancillary data.

Implement & Measure:

• Complete and contextualized data architectures: Data architectures that focus on completeness and contextualization improve the performance and value of inventory management systems and processes.
• Inventory management processes and systems: These leverage large volumes of data from diverse sources, including suppliers, factories, distribution providers and customers. The rich data structures and system connectivity enabled by digital thread principles help maximize the operational value of both RM and FG inventory management tools.
• Contextualized inventory data: Contextualization of inventory data provides material managers greater situational awareness and more comprehensive data upon which to act.

Closing Recommendations

Adopting industrial digital thread principles is essential for creating a resilient supply chain network, as they enhance the accuracy and usability of data, driving significant business improvements in a dynamic marketplace.

– Consider inclusion of digital thread principles in process, solution, and technology architectures spanning your supply chains.
– Evaluate the sufficiency of your current data architectures, models, and operations against supply chain performance.
– Determine the role of data form, content, context, timeliness, and other digital thread principles in mitigating the identified deficiencies. Determine if gaps are rooted in business applications, technologies, infrastructures, or data.  M

About the author:

 

Jeffrey Miller is Industry Principal Lead for Kalypso, a Rockwell Automation Business