techwatch
Should you build a control tower?
HAS A FLOOD IN A FOREIGN COUNTRY SHUT DOWN A KEY
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 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 with complex
supply chains—often with vast inventories of
low-margin products—that operate in a highly
volatile environment.
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, enabling companies to take corrective action.
Say an earthquake strikes a supplier in Japan. The supply chain
manager can respond to the event by, for instance, 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 that are willing to operate control tower centers on their
clients’ 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 notifying
managers that products will likely be needed
from a second supplier. Once the decision is
made to increase orders, 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
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?” ;
