In the past months, we have seen a resurgence in the supply chain control tower as many companies look for increased visibility of their supply chain network due to COVID-19. But what is a Control Tower? A Control Tower unites people, processes and technologies across organizations to establish a 360-degree view of the network (visibility) to enable coordinated, insight-based decision-making. In the past months, some companies are lamenting that they did not set up a control tower, while others are looking to implement their existing control tower in a different area of their supply chain. However, it is of vital importance to link the control tower to the supply chain strategy instead of acting quickly in response to a crisis.
The first question to answer why a company requires visibility on their supply chain is, “What do you want to achieve?” Is it to increase customer satisfaction by sharing up-to-date arrival times of their products? Is it to improve production efficiency resulting in lower costs? Or, is it to detect supply chain risks earlier? These questions are crucial to determine the scope of the control tower and how it will support the supply chain strategy. For example, for a global consumer products company, the strategic rationale for implementing a logistics control tower was to improve customer satisfaction by reducing stockouts at retail stores while reducing transport costs. This resulted in a 7% transport cost reduction and more importantly, a 18% reduction in store stockouts. The “why” question is the one that is most often left unanswered or insufficiently explored, leading to a control tower that is not congruent with the supply chain strategy and is therefore perceived to provide limited value.
Once the need for visibility is clear, the next step is to focus on who will act on the information provided by the control tower. Typically, sales or commerce is the owner of the customer interaction, but what do they need in order to share the right information? This can make the difference between e.g. setting up a central team or multiple regional/local teams globally to provide 24/7 support in local languages. Which other functions or teams will be impacted by a control tower? Based on answers to these questions, an organizational structure can be built for the control tower team. It also impacts the capabilities required for the people who run the control tower, as well as the (eventual) decision whether it should be an inhouse team or outsourced (make or buy). For a major beverage company, the main reason to outsource their planning control tower to Capgemini was a lack of internal capabilities. This led to an increased forecast accuracy for both the short and medium terms as well as NPI (New Product Introduction) forecast accuracy.
The next question to answer is how the team will provide value for the organization. Which processes should be changed, implemented, and managed? Which software is required to manage the processes efficiently? How can analytics and intelligent automation improve decision making? The “how” question is typically where companies begin, which can lead to selecting a great software solution which delivers beautiful dashboards but does not provide insights to improve the performance of the supply chain.
Finally, the expected costs and benefits of the control tower should be quantified. The costs can be estimated relatively quickly, but the benefits tend to take longer to calculate. Once again, we start with the supply chain strategy to determine to which goals the control tower should contribute. We can then quantify the benefits step by step, based on both internal benchmarks as well as previous project experiences.
The approach above ensures alignment with both the company and supply chain strategy, therefore the control tower will provide value both in times of crisis as well as when business returns to normal. This control tower will deliver actionable insights to navigate the ship during the high waves of crisis as well as in safer waters when business returns to normal. Now doesn’t that sound a lot better than being quick to respond to the latest crisis?
Lastly, for more information on control towers please see our previous blogs “A control tower organisation” and “The art of implementing a control tower solution what experience has taught us“.