The View From Digital Supply Chain Control Towers
By Richard E. Crandall, Ph.D., CPIM-F, CIRM, CSCP
As supply chains becomes longer, more global and increasingly complex, supply chain management professionals need a bird’seye view of their networks to ensure that all of the parts are moving together and performing as expected. Some industy experts believe digital supply chain control towers are the best approach for end-toend management.
A supply chain control tower is “a shared service center that monitors and directs activities across the end-to-end supply chain to make it collaborative, aligned, agile and demand-driven” (Bleda et al. 2014). This tool enables organization leaders to react to and correct issues as they arise via four main capabilities, including
- visibility from dashboards, alarm generation and business-tobusiness integration
- analytics gathered through root-cause analyses, simulations, what-if scenarios, risk analysis and response management
- the dissemination of information and action plans
- monitoring of outcomes.
OPERATING WITH 20/20 VISION
There are thousands of potential applications for digital supply chain control towers. For example, as companies increasingly convert to omnichannel business models, control towers could help maintain accurate records of the location, amount and availability of product inventory. This data could help supply chain managers determine the best place to stock the inventory — whether that is at a store or pickup locker, a regional distribution center that replenishes stores, or a fulfillment center that ships items directly to a consumer.
Next, a business needs to know the production capability within its supply chain. A supply chain control tower can help determine if a needed item is already in inventory or, if it’s not, how long it will take to manufacture or procure the product and ship it to the needed location. This knowledge is especially crucial for apparel and seasonal items.
Stretching even further, supply chain control towers offer better visibility and command over transportation and logistics operations. Accenture reports that three companies already have achieved success in these areas (Bleda et al. 2014): Unilever set up a supply chain control tower to provide visibility and management control for its multiple transport movements across Europe. Pfizer’s control tower measures the flow of products, orders and shipments. And Dell’s control tower coordinates parts, logistics and field technicians to respond swiftly to customer requests.
There are other uses, as well, such as risk management, vendor evaluation, strategic investment alternatives, supply chain effectiveness and project management, but these tend to require more advanced information capture and analysis.
SHIFTING BUSINESS EXPECTATIONS
Companies are under increasing pressure from end consumers, who have been conditioned by the success of e-commerce companies to expect a wide range of product choices along with high service levels. As a result, supply chains are scrambling to shorten product life cycles, compress manufacturing and delivery times, and better anticipate customer needs. Shareholders and chief financial officers also pressure companies to find ways to control their costs (Bentz 2014).
In this climate, legacy management methods are not enough. Previously, company leaders would walk through their own facilities; visit their partners’ facilities; and correspond with far-away partners and company-owned facilities through telephone, email, and digital and print records to oversee operations. These methods are more susceptible to error, often overlook key information and do not give a real-time picture of the supply chain’s operations and assets.
In recent years, developing technologies have offered supply chain managers more organized insights. One such example is supply chain event management (SCEM), which the APICS Dictionary defines as “a term associated with supply chain management software applications, where users have the ability to flag the occurrence of certain supply chain events to trigger some form of alert or action within another supply chain application. SCEM can be deployed to monitor supply chain business practices such as planning, transportation, logistics or procurement. [It] can also be applied to supply chain business intelligence applications to alert users to any unplanned or unexpected event” (Pittman and Atwater, eds. 2016).
Multinational software corporation SAP offers SCEM software designed to monitor and manage events across distributed processes, inventories and assets. The solution captures events from both a company’s and its partners’ systems, analyzes them against predefined plans, and triggers alerts or automated follow-up activities if deviations are found. Other software companies offer similar tools to support end-to-end supply chain visibility.
But even this visibility is not enough. SAP extended its SCEM software offerings with its supply chain control tower software in 2014. Beyond the benefits of its SCEM software, this updated system can help companies
- identify issues before they arise
- recapture control of outsourced supply chains
- reduce inventory levels
- leverage the power of big data
- overcome the complexity of information technology
- empower their enterprises with real-time decision-making
- become more agile
- gain end-to-end visibility of their supply chains (SAP 2015).
BUILDING A CONTROL TOWER
Before these benefits can be realized, companies must start by building strong bases for their supply chain control towers. The first step is to choose one of two basic approaches: a one-to-many network or a many-to-many network. The former is a hub-spoke model in which a company establishes direct contact with each of a number of suppliers and customers. In a many-to-many or multi-party network, the host company establishes a network platform through which all parties can communicate directly (Duckworth 2018). Control towers that are built on a one-to-many network offer limited opportunities for visibility and optimization because they tend to utilize disparate systems, which can be difficult to connect and maintain (Duckworth 2018). Conversely, supply chain control towers that are built on the many-to-many network foundation can share data in real time across a multi-party network, which unlocks new achievements in savings, speed, agility and resistance.
Once this choice is made, companies go through the following implementation stages as they grow to fully tap the capabilities of this technology:
- The supply chain control tower provides enhanced visibility and helps the company avoid disruption from unexpected events (Bentz 2014). For now, company leaders only react to the events.
- The supply chain control tower sets standards for functional excellence, supports cross-functional decision-making, provides basic analytics and what-if analyses, and manages key performance indicators (KPIs) at the function level (Bentz 2014). This enables company leaders to start integrating processes and information technology across silos.
- The control tower’s function extends from vertical silos to horizontal processes. It is responsible for enterprise-to-enterprise process excellence and KPIs at the process level (Bentz 2014).
- The supply chain control tower continuously assesses the enterprise-to-enterprise value and uses complex, sophisticated analytics to optimize value at every step of the supply chain, thus boosting business value and profitability. Most companies can only aspire to reach this stage at this point in time.
For some companies, stage four is not the only thing that seems out of reach. There are many obstacles that can limit progress. The most common challenge is cost. A supply chain control tower requires a substantial investment, but the return is difficult to quantify at this point. Other challenges are similar to those faced for other types of projects, such as executive buy-in, change management for company processes, systems integration, and privacy and intellectual property issues.
Even once these challenges are overcome, companies also need to determine who or what will be responsible for maintaining the information in the supply chain control tower, analyzing data, distributing and sharing information, solving problems, and making decisions based on insights. In some cases, this may be a person, a group or a piece of software. When the supply chain control tower is fully functional, this responsibility — or, in some cases, the right to access the information — may be shared across organization.
Reaching this level of functionality presents yet another challenge. After the system has been developed for internal use within a company, it must be extended throughout the supply chain and partners will need to be willing to collaborate and share data. This might require some negotiating and convincing in order to gain buy-in.
These challenges are just the tip of the iceberg. The decision to establish a supply chain control tower has substantial economic and interpersonal implications, so managers and executives need to carefully consider the project before jumping in. Partnering with supply chain control companies or software providers can help facilitate the design and implementation process and help leaders navigate through the various challenges that might arise.
Because of all of these obstacles, experts classify fully developed supply chain control towers as concepts for the future. “Creating a digital supply chain that functions as a true control tower — where every step along the way is both visible and managed — is the next frontier for global companies that want to succeed,” global trade management company Amber Road writes in an e-book about supply chain control towers (Amber Road 2018). For now, supply chain control towers are in their infancy, and leading-edge manufacturers are only just starting to adopt this approach to managing their supply chains (Heckler and Gates 2017). Though these implementations are limited in scope for now, they have the potential to bring together analytics, automation, augmented decision support, modeling and other capabilities as a centralized function.
This synchronicity will unlock even more visibility into connected aspects of the supply chain. Supply chain managers will be better informed and able to address issues that are not under their direct control by collaborating with supply chain partners. Furthermore, supply chain control towers offer a single version of the truth across functional boundaries and across suppliers, contract manufacturers, transportation carriers, third-party logistics providers and more. Through improved awareness, communication and collaboration, companies can achieve truly efficient supply chains.