Pearson on Excellence: Supply chain control towers are taking off
August 01, 2014
Simply listing a typical company’s supply chain challenges could consume this column. However, there’s a small group of capabilities that are critical for supply chains in today’s volatile environment. One is end-to-end collaboration—getting everyone on the same page. Another is organizational alignment—putting the right skills in the right place at the right time. A third is dynamic decision making—knowing what to do when it’s most important. The last is maximum agility—executing smart, rapid responses to external or internal events.
There is a singular initiative that simultaneously enables each of these capabilities: At Accenture, we call it a supply chain control tower.
Comparisons to a tower that manages air traffic may be cliché, but are accurate. Similar to the airport spire, a supply chain control tower monitors activity, gathers and processes information, and coordinates actions from a central location. And somewhat similar to the airport facility, three capabilities are paramount in and around the supply chain control tower:
Visibility: With real-time access to enterprise-wide information—demand, orders, inventory, shipments, capacity levels—control towers help to know about now.
Analytics: Control towers interpret visibility data—conducting root cause analysis, triggering alerts, detecting tipping points—and use analytics to understand why an event has occurred possible responses.
- Execution: With the control tower as a hub, each part of the supply chain knows when and how it’s affected by another. Control tower assets, both human and automated, disseminate information and action plans across the supply chain and monitor activity to ensure compliance.
Supply chain control towers can be designed for several business outcomes. What follows are three hypotheticals.
A chemical company implements a control tower to centralize order fulfillment operations and improve transportation performance. When a customer places an order, the company’s ERP system generates outbound delivery orders just as it did before the control tower was implemented. But instead of orders being routed to local transportation planners at various sites, transport planning is now performed within the control tower.
Using advanced analytics, control tower planners create shipment plans that consolidate routing and assign carriers. They then tender shipments to carriers and advise each location of its plan. During transport, the control tower provides en-route visibility and monitors delivery status. And when a carrier submits a freight bill, the control tower expedites audit, dispute resolution, and payment processes via a shared service center.
An electronics manufacturer has six North American DCs that ship directly to retail stores. With manufacturing operations and suppliers based mostly in Asia, the company decided to build a control tower to help acquire faster, more accurate information on production plans and suppliers’ inventory positions. The company’s new supply chain control tower generates alerts about expected shortfalls and delays in production runs at suppliers and contract manufacturers.
Using analytics and scenario-modeling, it also gauges the potential impact of these events on supply plans, production schedules, service levels, and revenues and margins. Through the control tower, various actions, such as sourcing from alternate suppliers, realigning global inventory, and modifying production schedules are assessed, and the optimal choices are executed.
Support business strategy
Control tower reports show that the logistics costs of a U.S. consumer goods company are rising, and that on-time-deliveries are slipping in their eastern region. A logistics dashboard in the control tower identifies transportation—particularly planning and network design—as a major contributor. The tower also reveals that distribution capacity in the eastern region has not kept pace with demand.
Instead of launching a one-off project, company executives have the control tower team formulate a short-term strategy to optimize product flows to reduce overall transportation costs and meet service-level targets and a long-term and a greenfield strategy to redesign the network to shut down two West Coast distribution centers and open two new ones in the eastern region. The result: Extensive cost reductions and improved service levels.
Alignment; collaboration; rapid response; and organizational agility. These elements are indispensable for supply chain leadership. And you may also need a control tower to help land them properly.
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