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Supply chain control towers

What can they do for your supply chain?

DSV Expert Insight
By Rob van Doesburg, CapGemini Consulting and Wilbert Tholhuijsen, DSV

According to trade press releases and third party logistics (3PL) presentations, “control towers” are springing up like daisies all over Europe. Anyone who is anyone in the supply chain arena has at least one, if not several. The control tower concept is one that is easy to visualise: a hive of activity staffed by multi-lingual traffic controllers. One could imagine that the central point of the control tower hosts a vast screen depicting an integral overview of all freight flows, clearly pinpointing any problem areas. Is that really what a control tower is about? Are you missing out by being stuck with your ‘old-fashioned’ freight management desk? This article will bring the control tower back down to ground level, explain its functionalities and try to identify situations in which the concept really adds value.

What is a control tower?

To clarify what a control tower is, we will start with a brief summary of what it is not:

  • It is not actually a tower
  • It is not in direct communication with truck drivers, captains or pilots
  • It does not control the production, storage, replenishment and order process
  • It is not a synonym for a 4PL

The essence of the control tower concept is to provide supply chain visibility across divisions, countries and modalities. The heart of the control tower is an information hub supported by a set of detailed decision-making rules and a trained team of operators. The big advantage of this central information hub is that it gathers and integrates data from a variety of sources and subsequently distributes it in a consistent format. This integrated overview allows the control Tower operator to detect risks or opportunities at an earlier stage. The actual scope of a control tower differs from one company to another, ranging from the orchestration of raw material supplies to a factory to an end-to-end control centre. Management of spare parts and returns is always done separately (figure 1).

What is the difference between a control tower and traditional freight or distribution management?

Contrary to the traditional way of managing freight and distribution flows from either origin or destination, the control tower is not physically or hierarchically linked to one specific location.

Furthermore, a control tower is usually focused on “event management”. Status information from suppliers and logistics service providers is collected and stored in a structured way. It is then used to provide the control tower team with insight into the actual status of orders, products in stock and shipments.

This information is used to make informed decisions when planning, monitoring and analysing the supply chain.

In comparison, freight management only focuses on transport or distribution. Freight management activities typically include freight forwarding activities, tracking and tracing as well as pick-up and delivery scheduling.

 

Figure 1: Typical activities of control towers and relationship with freight management.

Who needs a control tower?

Control towers are used to improve visibility in “complex” supply chains. Your supply chain qualifies as complex when:

  • the scope is global or inter/intra-continental
  • the dependency is high
  • many supply chain activities are outsourced
  • your customers’ service requirements are increasingly challenging

Complex supply chains have fast and fact-based information requirements. Questions about the status of an order, the logistic costs of a product, the performance of a supply chain partner or a root cause analysis need a quick, integral response. A control tower concept with the right data centralisation solution has proven to be effective in providing answers to such questions.

Some of our case studies show that even highly fragmented supply chains can also gain significant benefits from a control tower function. Nevertheless, companies that are heavily structured around local organisations can expect some resistance when considering establishing a control tower. As with most centralisation efforts, local organisations will object to losing direct contact in their local language and to having reduced influence in ad-hoc problem-solving. If your local organisations currently have a large degree of independence, a balanced scope and phased implementation will ensure sufficient local control combined with the benefits of a centralised approach. This will allow people to get used to the new concept slowly, rather than being resistant if a “big bang” approach is adopted.

Can I set up a control tower internally or should I outsource it?

To set up and run a control tower, you need specific capabilities in:

  • Planning: typically people with a background in supply chains
  • Event management: typically people with a background in transport operations
  • Business intelligence: typically people with a background in operational improvement
  • Management of supply chain partners: typically people with a background in 3PLs
  • IT management: handling IT tools to exchange data with supply chain partners (suppliers, manufacturers, 3PLs and carriers) as well as internal system management to store the data in a structured way and provide information to support the control tower functions.

A shipper’s decision on whether or not to outsource a control tower depends first of all on whether it is feasible to develop the above-mentioned operational and IT capabilities in-house. Secondly, the business case behind the investment required for an in-house solution compared against the indirect costs associated with outsourcing will have a big impact on this decision. Volatility of the workload and a certain critical mass will further influence the benefits of an in-house versus outsourcing strategy.

The trade-off between the increased control and in-house expertise when insourcing a control tower needs to be precisely balanced with the increased flexibility offered by outsourcing. Depending on the scope and volume of typical control towers, a small to medium-sized team of full-time staff is needed to cover the skills listed above. Holiday seasons, peak seasons or staff illness can pose a serious risk to business continuity. Insourcing, at least in the early stages, tends to favour process quality whereas outsourcing provides a solution with greater long-term flexibility with regard to resources and systems.

What are the typical benefits?

As the term suggests, a control tower helps to keep situations under control. Ultimately it should enable action to be taken to prevent potential problems. Without a central team and an integral overview, a lot of time is spent on local fire fighting. A control tower can identify patterns in local issues and develop structural countermeasures based on processes that fit the big picture.

This should all sound like music to the ears of any supply chain manager, but it is nevertheless essential to assess the expected benefits carefully. Firstly, it is key to align expectations and take a reality check, not only internally but also externally towards the providers. Secondly, the benefits should form the basis of the set-up in terms of processes, systems and resources.

Most of the benefits of a control tower come from increased supply chain visibility. It enables better planning, decision-making, proactive event management, improvement of the performance of supply chain partners and more sophisticated supply chain analytics. In the end, this will result in:

  1. Savings on logistics costs
  2. Reduction of inventory
  3. Improvement of service levels such as total cycle time and on-time delivery

 

About the Experts

Rob van Doesburg, Senior Project Manager and Consultant at CapGemini Consulting.
Rob has years of experience in supply chain management in manufacturing, retail and the 3PL industry. He has been a core member of the SCM practice of Capgemini Consulting since 2007 and is specialised in supply chain strategy design, supply chain visibility & control towers, e-fulfilment, warehousing & transportation management, lean logistics and implementations of systems (ERP/WMS/TMS/SCV). He is Capgemini’s Global Lead on Logistics and Fulfilment and lead author of the Point of Views on Global Control Towers, Supply Chain Visibility Software Solutions and Warehousing.

Wilbert Tholhuijsen, Director Global Accounts, DSV.
Wilbert has been active in the logistics industry for nearly 25 years in a combination of operational and commercial roles, with strong focus on the development of new services. Currently he heads the Global Accounts department at DSV. In the process of continuously growing in pace with DSV’s largest customers, his team is the first point of contact for design and implementation of complex restructuring processes.

 

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