Cyber–physical systems use digital twins to provide advanced monitoring and control functions, including self-diagnosis. The digital twin is often conceptualized as a 3D model, but mathematical models implemented in numerical simulations are required to reproduce the dynamical and functional characteristics of physical systems. In this work, a cyber–physical system scheme is proposed to monitor and diagnose failures. The virtual system, embedded at the supervisory control level, combines concepts from complex networks and hybrid automata to detect failures in the hardware components and in the execution of the sequential logic control. An automated storage and retrieval system is presented as a case study to show the applicability of the proposed scheme. The functional test and the obtained results validate the implemented system that is shown to be capable of fault diagnosis and location in real time. The online execution of the digital twin present several advantages for diagnosing multiple concurrent failures in sensors, actuators, and the control unit. This approach can be incorporate into diverse manufacturing systems.