How Digital Twin Technology Can Help Retail CIOs

 It’s fair to say that retailers have ridden out a decade of dramatic shifts, with more inevitably to come. Beyond the initial swing from brick-and-mortar to e-commerce, the pandemic has fueled the acceleration of consumers’ omnichannel expectations and exacerbated macroeconomic headwinds, including inflation, labor and inventory issues—underscoring the critical need for retail resilience.

For CIOs and IT leaders in the retail sector, advanced technologies that leverage machine learning and artificial intelligence—like digital twin capabilities—have risen to the top of the priority list. These technologies can arm retailers with real-time and forward-looking data on critical signals, like customer behaviors and expectations, market and policy-related trends, and even weather events. With these insights in hand, inventory and demand planners can build flexible, data-driven plans—based on a number of what-if scenarios—in order to confidently respond to the unplanned changes and challenges that will no doubt continue to impact their industry in the coming years.

Inherently, agile companies have greater immunity to market volatility. But as we’ve seen over the past year, even leading brands like Nike and Walmart have struggled to protect their bottom line. Whether it’s pandemic-related disruption, the impact of the bullwhip effect or volatility due to market consolidation, retailers must be prepared to respond strategically to disruption. Thankfully, as the complexity of challenges continues to grow, embracing technology innovations can arm inventory planners with an even greater level of agility so they can change direction quickly to meet demand, deliver revenue and protect margins in any environment.

That’s where digital twin technology comes into play. A digital twin provides a virtual visualization of your real-world business operations. For retailers, this could be a virtual copy of your entire physical supply chain—from suppliers and manufacturers to warehouses and logistics partners. Add in insights from external sources—like weather patterns or fuel pricing—and retailers can leverage this virtual model to plan against a number of variables and identify potential points of failure across their supply chain ecosystem.

Overall, the market for digital twin technology is expected to grow at a 42.1% compound rate annually to $53 billion by 2028, up from $6.5 billion in 2021. It is easy to understand why. If you’re a home furnishings retailer, for instance, you can use digital twin technology to track real-time weather data in the markets where you manufacture and sell your goods. With this insight, you can model the impact of an unplanned storm to see how a factory shutdown or transportation delay might impact the flow of products across your supply chain. You can then develop strategic contingency plans so that if a weather-driven event occurs, you can quickly pivot to ensure you aren’t missing out on any revenue as a result of this disruption.

It’s clear that digital twin capabilities can be a boon for retailers—especially when it comes to strategic inventory and merchandise planning. But every organization has different needs, and CIOs will want to be thoughtful as they look to implement these advanced capabilities across their business.

If you’re a retail CIO, here are a few considerations that should be top of mind as you think about your company’s unique approach to leveraging digital twin technology.

• The business need: Any new technology under consideration must first address the business need—especially in today’s dynamic market. Already, retailers and CPG companies such as Lowes, Kroger and Tyson Foods are exploring and deploying digital twins in a variety of ways that are meaningful both to the customer experience and business operations. Heading into 2023, I expect the technology to move from on the radar to reality as more and more retail CIOs set strategies to mitigate the bullwhip effect and other market-driven volatilities.

• The power of moving from insight to action: There is a deluge of data available to retailers today, but without the right tools it’s impossible to turn that data into strategic action. Solutions from major cloud providers can help you get the most out of your existing data (past transactions, sourcing plans, demand patterns, etc.) while also tapping into external data sources (consumer trends, pricing updates, sustainability data, etc.) so you can create the most relevant, insight-driven plans. By instrumenting inventory, merchandising, and demand plans with leading technologies now, CIOs can help their supply chain leaders future-proof their business over the next several years and for the next several cycles.

• Asking the right questions: Next-generation planning, with a supply chain digital twin as a central component, requires IT leaders and their cross-functional partners to ask several important questions. First, how do you determine what is happening? Doing so requires consolidating and analyzing potentially terabytes of data. Second, what external signals should you be tracking, and how will this improve your decision support? Understanding what might impact your business specifically and how tracking against that can help you mitigate risk is critical. Finally, how can you get ahead of those trends? Beyond what-if scenario planning to help you react more strategically, your inventory, merchandise, and supply chain planners should leverage digital twin capabilities to be more proactive, shaping demand and driving trends to turn data into a competitive edge.

It’s clear that business and economic challenges are inevitable. And for retailers, the added uncertainty of shifting consumer behaviors and supply chain volatility makes strategic planning an even more difficult (yet critical) feat. But it’s not about avoiding chaos or change; it’s about getting ahead of it. In 2023 and beyond, I believe we’re going to see more retail CIOs help their companies do just that by making digital twin solutions part of their technology stack

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Article resource: https://www.forbes.com/sites/forbesbusinesscouncil/2022/11/03/improving-the-retail-customer-experience-with-technology/?sh=3990c63672de