Despite numerous advances in plant automation, operating companies today continue to struggle with inefficiencies across supply chains that provide material, equipment and the services required to operate and maintain their facilities.
Many of the commercial interactions between buyers and sellers rely on outdated manual workflows to secure verification and move through the invoicing and payment processes. These error-prone steps exacerbate lengthy dispute and reconciliation cycles, as well as perpetuate inefficient auditing practices that burden business environments already rife with mistrust.
Leading-edge technologies can revise old-fashioned processes to help solve long-standing and complex challenges, by connecting digital twins of operating assets with smart contracts powered by blockchain. As a result, companies can streamline commercial processes and generate significant savings for all involved parties.
Digital twin technology starts by creating a virtual replica of a physical asset that provides a digital industrial work surface which allows owner and operators to orchestrate end-to-end workflows across all business functions and data silos, driving collaboration throughout their organizations. When it comes to asset management, work processes or dynamic modeling and analytics, digital twinning jump-starts predictive capabilities. When connected to smart contracts, the combined technologies enable owners and operators and their customers, suppliers and ecosystem partners to use real-time sensor level and field data, along with simulated data, to validate and automate transactions, thereby improving the quality of their transactional data.
Say, for example, that a digital twin is created for an operating gas plant where methanol is used in one of the plant processes. The methanol is supplied from a tank in the plant where the tank level, inflows and outflows are measured by sensors. When the tank level reaches the fill level lower limit, the methanol provider is notified and a truck is dispatched to refill the tank. Using the measurements from the digital twin, smart contract technology then taps connected data sources to verify the delivery of the methanol by the supplier, applies the appropriate pricing, and provides the approved transaction data to the accounting systems of both buyer and seller where the payment is executed per the agreed payment terms.
Uniting operational data with smart contracts allows for the automation of all commercial transactions across operating and maintenance activities. Value is distributed to both buyer and the seller in the form of eliminating manual, non-value-adding processes as well as increasing transparency, improving financial performance and fostering trust. Through the collective elevation of trust and automation of transactions in near-real time at high fidelity, the marriage of digital twins and smart contracts can expand beyond commercial transactions to transform other components of operations, including that of ESG measurement and reporting.
Manually crunching data to fulfill ESG reporting requirements is a complex, labor intensive and non-value-adding activity. In an arena where there’s increasing pressure for accuracy and transparency, but the rules aren’t yet defined, digital twins and smart contracts can help businesses comply with emergent measures. They can also garner accurate data from certified labor practices of sourced materials all the way into Scope 3 greenhouse gas (GHG) emissions. These the proverbial “elephant in the room” for most companies with large and complex supply chains, and are a particular challenge for the oil and gas supply chain, where downstream embedded emissions account for approximately 80% of the total carbon footprint.
With new regulations on climate disclosures swiftly forthcoming, automating such metrics and reporting capabilities is the only way to move forward. ESG and GHG data is going to have to meet the rigorous standards of timeliness, accuracy and auditability that financial reporting is held to today. Right now, companies’ systems of records are designed specifically for the immutable recording of financial information, and aren’t well-suited to operational transaction information grounded in real-world, physical actions.
Because digital twins represent asset models in a network data model complete with operational data, entities, business functions and time stamps, there’s extensive value when that data is leveraged by smart contracts. The digital twin can serve as the controlling nexus for the complex network of entities, assets and data sources, not only from itself but also from anything upstream and downstream. A network of vendors, suppliers, partners, customers and regulators can then be maintained by the digital twin while smart contracts automate the transactions — for both commercial transaction purposes and ESG metrics and reporting — between each connection in the network.
With many changes ahead, supply chain actors and owners and operators in the asset-intensive industries must embrace new technologies to meet challenges head on. Digital twins and smart contract technologies present an opportunity for those organizations looking to leapfrog operational transformation with innovative, next-generation technology solutions.
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