Should you build a control tower?
Has a flood in a foreign country shut down a supplier's manufacturing plant? Has a strike crippled a major port you use for shipping? Ask almost any supply chain or logistics manager if an unexpected event of some kind has disrupted the company's supply chain flow in the past year and the answer is likely to be yes.
That's why a few leading multinational corporations are starting to embrace the "control tower" concept for running their global supply chains. The control tower facilitates rapid decision-making in the event of a supply chain disruption or even the threat of a disruption. "A lot of recent events—the earthquake in Japan and the floods of Thailand—have brought home the clear sense you need to get control over what is going on across the extended supply chain," says Bob Ferrari, managing director of the Ferrari Consulting and Research Group.
Risk mitigation is a major factor driving interest in a "control tower" strategy. Kirk Munroe, vice president of marketing at software vendor Kinaxis, says there's been a surge of interest in the concept during the last year, particularly among large global companies in industries known for having complex supply chains, highly volatile operating environments, and vast inventories of low-margin products.
What's a control tower? Picture a room with computer consoles and overhead displays. Instead of air traffic controllers, you have a dedicated staff of supply chain experts monitoring those screens, which allow them to track freight movements and stay on top of any relevant developments. That visibility results in rapid notification of disruptions, allowing companies to take corrective action. Say an earthquake strikes a supplier in Japan. The supply chain manager can respond to the event, increasing the company's order of parts from a supplier in another part of the world.
Although there are plenty of third-party logistics service providers willing to operate a control tower center on a client's behalf, a company can do the job itself with the right software. Vendors offering either components or a platform for a control tower include Manhattan Associates, GT Nexus, E2open, Kinaxis, and Progress Software.
The software applications behind the control tower should connect planning with execution activities. In other words, if a disruptive event is detected, planning software should recalculate fulfillment of an order, reassessing the delivery status of in-transit inventory and recognizing that products will be needed from a second supplier. Once the decision is made to increase orders, then the system should be able to execute, placing the order with a second supplier and arranging with a carrier for the freight movement.
The essential element of any control tower is its ability to monitor developments in "real time." That requires data integration with all parties in the supply chain—suppliers, carriers, and third-party logistics service companies. "Until you have the ability to see—understand—and act on what is occurring throughout your supply chain, you do not have true control of your systems, therefore not a real 'control tower,'" says Guy Courtin, a director of industry solutions at Progress Software. He adds that control towers give companies "the ability to take corrective action to save costs or to take proactive action to capture revenue."
Despite the emergence of a number of vendors in this space, the control tower concept is only beginning to take root. Ferrari sees many supply chain and logistics executives cautiously starting to investigate its potential as well as the costs for the software and implementation. "This is new stuff," he says of the control tower concept. "A lot of manufacturers in high tech and consumer goods are trying to figure it out. They are asking—do we need to go in this direction?"
