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On the Relevance of Digital Twins for Consumer Products

Explanation of the Added Values in 8 Application Scenarios

On the Relevance of Digital Twins for Consumer Products
29.06.2021
Retail & Consumer Goods
Customer Experience
Counterfeit Protection
Logistics

The digital twin is commonly defined as a  representation of a physical product, service or process of the real world in the digital world. The extent of the digital twin may vary from “data twins” that collect data from/for the physical objects up to “simulation twins” that are especially used for product development and construction of complex objects.

 
This article focuses on the digital twin in another exciting area of application. Based on 8 application scenarios I will demonstrate that there are also clear added values for consumer goods through the use of the Digital Twin - for both brands and retailers as well as for consumers.
 

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1. Counterfeit Protection

There are two sides to counterfeit protection: On the hand there are evolving regulatory requirements in certain countries and markets that require the unique marking and sometimes tracking of items. For example, Russia is currently adding more and more (consumer) products in the scope of their digital tracking system Chestny ZNAK  - mandatory marking with a unique identifier is already in place for products such as medicaments, shoes, certain fashion items, perfumes, dairy products and water.


On the other hand brands want to protect their products and reputation without a regulatory need. In this case a unique item identification is one puzzle piece in the brands anti-counterfeit concept. Next to copy-protection measures of the product itself (e.g. tamper evident closures) additional verifications services offer the possibility for relevant stakeholders in the supply chain (such as wholesalers, retailers and end-consumers) to verify the items by scanning the unique identifier.  
 

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Depending on the data carrier it might be possible to easily copy a unique identifier, therefore the verification service should consider different criteria for verification (e.g. tracking data) and determine a prediction for product originality based on the analytics. A better but pricier alternative is the use of carriers with special security mechanisms, e.g. NFC (Near Field Communication) tags in combination with the usage of digital certificates for an additional level of security.

Tapping a product with an NFC tag allows reading and encrypted sending of the unique content itself (e.g. unique URL incl. unique item identification). If appropriate, some special unique embedded code of the chip might be added to the request. The encrypted data/message will then be decrypted by the secret key which is only available to the validation service/server. The web-based validation service can check the tag’s authenticity and verify the information validity based on the information contained in the URL – consumer do not even need a specific app on their mobile device.

In addition, leading tag providers offer additional security features: First, tap-unique tag authentication data upon each read-out is automatically generated (tap counter) and transmitted. Second, status information, such as about broken seals, might be added.

2. Gray Market Detection

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Gray markets where goods are bought and sold through unofficial channels are not completely illegal but pose a major problem to consumer product brands as pricing strategies and authorized distribution channels are undermined. The detection of such gray market goods that should not be sold officially is often time consuming. Detection activities require high effort and costs as often test-purchases within the specific market are necessary.


By sufficiently incentivizing the consumer (e.g. by offering a special customer experience) to scan items before, during or after purchasing them, the company gains important information for gray market detection. By (auto-)comparison on geo locations of each scan on the one hand and supply chain information on the other hand deviations from intended and actual locations are easily identifiable. Patterns of deviations help to identify sources for gray market goods for further investigations. 
 

3. Inventory Management

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Compared to inventory management by scanning of printed codes (e.g. Barcode, QR Code or Data Matrix Code) or even worse with paper and pencil, RFID (Radio Frequency Identification) technology allows a much faster determination of stock amounts. With RFID no line of sight to the objects to be counted is required. In addition, the accuracy level is increased significantly and stock amounts can be determined with up to 100% accuracy.

 
A famous example for RFID usage is the Spanish fashion giant Inditex which is the company behind brands such as Zara and Massimo Dutti and one of the largest fashion retailers in the world. Each item of clothing is identified by an RFID chip that is incorporated into the electronic article surveillance. After adding and activating the chip, the location of each clothing is known throughout the whole supply chain up to the shop floor. Once the alarm is removed the data on the chip will be deleted and the alarm and identification tag can be reused for another garment.  
Moreover, every retailer can easily collect precise information of the inventory without much effort.

 
Inditex therefore benefits from the following advantages:

Store staff knows about shrinkage due to theft, damage in transit or administrative and cashier errors
Stock in the shelves can be replenished without delay and more items can be ordered immediately when an item is sold out
Fast turnover of goods allows maintaining a low inventory level to avoid inventory backlogs. Individual garments can be sent to any store in the world in less than 48 hours

4. Up- and Downstream Supply Chain

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Unique item identification allows the tracking of all kind of items during their entire lifecycle. Looking at the upward supply chain ingredients and intermediates might be tracked to know exactly the composition of the finished goods (e.g. parts of a bike).


Looking at the downstream supply chain the finished good and its movements shall be tracked. By aggregation it is known which items are packed into a specific (shipper) case and which cases are packed on a specific pallet. By knowing the movements of the pallet one also knows the movement of each item.

To conclude, by use of intermediate item identification it is possible to build an item hierarchy for the finished product at first. Then, by building packaging hierarchies, one can easily track items.
 

5. Decision Making Support

Sometimes space on the packaging of a product is limited but there is so much more to tell. By scanning a code or tapping the product consumers might be transferred to a webpage with additional information and/or promotions.  Even though most information certainly relates to the product itself (features, ratings, instructions for use, etc.), sometimes information on individual item level can add value and/or positively influence a purchase decision. For example, production timestamp, quality inspection information and sustainability KPIs may be relevant for consumers.


With regard to secondary markets information on item level gain even greater importance. Digital Service Books for example provide a full item history incl. spare part replacements and maintenance activities.

6. Customer Experience – Independent of Touchpoints

The key question is how scanning and tapping of unique identifiers can enhance the user experience and thus encourage the consumers to do so. The truth is that there is no universal answer.

For each industry, company and/or product one has to find the individual “right” incentives - concepts that work for one brand must not necessarily work for the other. Yet, here are some samples on different kind of user experiences:

  • Consumer information before, during and after purchase: Simple redirect to a product information website with up-to-date care, usage or installations instructions in the required language
  • Virtual purchase advice (e.g. via mobile app, for example the app could know the personal skin characteristics and recommend the suitable skin care products)
  • On-Spot-Promotions (even customized promotions are possible)
  • All possible types of raffles
  • Participating in loyalty programs
  • Self-checkout
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With the unique identifier you are not depending on a specific touchpoint (e.g. own stores) to provide a customer experience but still an individual user experience provided by a specific touchpoint is possible. GS1 supports this approach of individual usage of the unique identifier with the so called GS1 Digital Link. GS1 Digital Link includes globally used identifiers (such as product number and serial number) into a web address.

Intelligent and configurable “resolvers” direct the scanner of the code to the appropriate destination. For example, the resolver can distinguish the destination URL depending on the device, application and/or location of the scan. That means one could distinguish scans from warehouse applications, store applications and end-consumers. To conclude, based on a single unique identifier different information and/or experiences can be provided independently by different organizations.

Moreover, it is possible to change the user experience depending on the number of interactions. For example, the first user experience (e.g. promotion/discount wheel) might be different to a follow-up experience (e.g. product information).
 

7. Customer Retention

As a basis for customer retention, the goal is to easily connect a customer's unique digital ID with the unique digital IDs of the brand's products purchased, regardless of the touchpoint or store. If the unique ID of the item purchased is only accessible after purchasing/opening, it can be used as verification for the purchase. Instead of arduous processes (e.g. cutting, collecting and sending of loyalty marks) consumers only have to scan the code inside the packaging.

New touchpoint independent ways of customer experience and enhanced customer retention programs as briefly described above  generate valuable customer insights that may be used for product and service innovations.

8. Self-Service Payment via Mobile Phone in the Retail Store

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Long queues at checkouts can significantly spoil the shopping experience. In order to avoid waiting and to speed up the purchasing process, customers scan the unique identifier of a product with the camera of their mobile phone or tap the product in case of NFC tags.

Items then are stored in a virtual shopping cart and can be easily paid for via mobile app and known payment methods (depending on the payment options the retailer wants to offer). 

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Written by

Christian Mehrmann (1)
Christian Mehrmann
Expert for Counterfeit Protection