Control towers emerged in the 1990s as the logistics industry—specifically 3PLs—needed a mechanism to provide visibility to their clients. Successfully addressing the challenge of accounting for inventory in motion/at rest was a differentiator for all players (3PLs, distributors, retailers, wholesalers and manufacturers). Thus, the foundation was laid for what is known today as digital control towers (DCTs). While the last three decades of supply chain innovation were transformative in many ways, progress has been slow in better enabling companies to predict demand with greater accuracy, thus many of them still resort to the fail-safe of buffering demand uncertainty with inventory. Of course, this may be also-ascribed to the fragmented/siloed thinking pervasive in the way organizations and supply chains continue to operate, but the fact remains that companies need a more powerful way to gain visibility into their networks.
Adoption of tools that will create a seamless end-to-end supply chain view is lagging customer expectations. Enter the “new” control tower. The concept of a control tower is not new; it has been around for decades, yet the adoption and actual use thereof in the context of supply chain is slow. Considering the many compelling use cases, one must ask, “why this is the case?” On the surface, the answer is simple. Many companies still adhere to the philosophy of minimizing cost and are averse to investing in systems and tools that will enable efficiency. As a result, these same companies often lag in supply chain visibility, performance, excellence and efficiency.
The picture is far from consistent. While the most advanced companies use supply chain management software, there are few that can orchestrate their supply chains with an end-to-end view. The reality is there are still companies today that have barely adopted the tools to position them at a level three supply chain maturity. The most important enablers of effective supply chain management are: supply chain partner alignment (60%), internal business functions alignment (49%), upstream and downstream process integration and information-sharing (47%), risk governance (44%), flexibility and redundancy (37%); data, models and analytics (28%); and complexity management (26%). (DHL, 2016)
The availability of data and the intelligent predictive analysis thereof is critical for the future success of all players. Data by itself has little meaning. However, when tied to intelligent interpretation it holds a compelling value proposition that differentiates players in their ability to maintain a balanced supply chain while meeting their fulfillment promise (agile & responsive).
The next wave of DCT is upon us. The DCT enables and fuels the basis of supply chain orchestration: an end-to-end view of supply and demand, along with meeting the requirements and challenges around each with consideration of extraneous factors incorporated in the algorithms that drive predictive analytics (e.g. weather, news, social events, market forces). (JDA, 2018)
A few years ago, only a small percentage of companies managed their supply chains in a structured manner. However, several trends in the supply chain space, e.g. globalization, increased personalization of products, shorter product life cycles and a higher demand for agile supply chains is accelerating the need for adoption of the tools that enable an orchestrated approach.
Supply chain disruption is the nightmare of every supply chain and logistics professional, albeit in the manufacturing, retail, 3PL or distribution space. Visibility and responsiveness are key to avoiding and/or mitigating disruption. It goes without saying that IT will be pivotal to performing true end-to-end supply chain orchestration, providing visibility at all tiers. That said, strategic partner collaboration with up and downstream data sharing is critical, bridging the trust gap and working toward a shared vision of supply chain performance excellence.
A Case for the Cloud
Not only does a cloud-native DCT serve as a seamless collaboration platform, allowing both up and downstream partners to collaborate in real-time on one version of the truth and resolve exceptions, it also provides an environment in which data can be shared securely for the benefit of all partners.
A cloud-based DCT with these robust capabilities will be foundational for companies undergoing digital transformations and that need the ability to access real-time digital signals from across their networks. The ability to proactively manage the unpredictable will require companies to adopt this type of data-driven decision-making tools, as they move toward building autonomous, resilient and differentiated best-in-class supply chains.
A cloud-based platform enables more responsive supply chain execution. By default, the DCT is a data-gathering tool, continually updating information, assessing risks, surveying supplier business continuity plans and reviewing mitigation strategies. Drivers for the adoption of a cloud-based platform are (a) cost, (b) outsourcing, (c) specialization, (d) digitization, (e) homogeneity of business models and (f) intensified competition. (DHL, 2016)
Key Outputs from a Digital Control Tower
- Supply chain integrity. A DCT provides visibility that allows interventions to third and fourth tier nodes of the supply chain. An end-to-end view of supply chain activities, with assessed risk and mitigating action at each link in the chain, secures supply chain integrity. Algorithms that enable predictive events, learning from the corrective/mitigating actions taken, provide a platform for prescriptive analytics, constituting the building blocks for an autonomous supply chain that will be both resilient and agile.
- Risk mitigation. Early warning allows companies to seek feedback from supply chain partners and quickly take mitigating actions, e.g. sourcing components from backup suppliers to minimize the impact. The data feedback loop ensures an up-to-date picture of the current state of the entire network and supports informed responses to major incidents, coordinated across the network. Quicker response to potential supply chain disruptions translates to cost savings and greater efficiency (avoiding costly disruptions and remedial actions, e.g. expedited freight at a premium).
- Operational agility. Often the strategic decisions, taken in close cooperation with the end customer, make the difference to supply chain resilience and agility.
The New Generation of Digital Supply Chain Orchestration
Every person, process and movement leaves a digital footprint in the supply chain. The data from these digital footprints is the fuel that powers the new generation of supply chain solutions. Harnessing this data will drive exponentially better supply chain performance with improved customer experience. Tomorrow’s supply chains will be interconnected with the digital ecosystems and instrumented by machine learning (ML) and artificial intelligence (AI) to intelligently create answers to questions or problems in real-time while learning.
Digital control tower technology enables these capabilities and is more relevant now than ever before. It brings together three different platforms—visibility, technology and communication—to enable a more consumer-centric, demand-responsive supply chain.
Digital hubs are key enablers to achieving the attributes of agility, responsiveness and resilience. Harnessing business data from both inside and outside the organization improves core processes and performance, maintaining balance in the supply chain and smoothing the impact of disruptive events.
Real-time visibility, collaboration and intelligent response capabilities for more intelligent scenario planning and profitable responses will lead to improved customer service and lower costs. Old-fashioned response management—coordinated through control towers with siloed and limited application—has been inverted to a DCT that delivers tangible real-time application that bridges the supply chain from end-to-end. The vision of real-time visibility and end-to-end orchestration has become a reality.
ElMarie Hugo is a supply chain professional with 17 years of experience in the 3PL and distribution space where she has worked extensively with companies in the automotive, retail and pharmaceutical markets defining and executing their go-to-market strategies in LATAM, Africa and EMEA.
DHL. (2016). Insight On: Risk and Resilience. 12, 28.