but outsourcing the execution,” says Jordan Kass, vice
president of management services at C.H. Robinson’s
TMC division.
MANAGING COMPLEX GLOBAL SUPPLY CHAINS
Control towers first emerged in Europe in the late
1990s. They evolved from managed transportation
programs, where 3PLs oversaw the movements of
multiple carriers for a shipper client. When 3PLs
began managing orders and inventory along with
carrier movements, those programs became known
as control towers, says Terry Haber, senior vice president of solutions design/business development for
Netherlands-based Ceva Logistics.
Multinational companies turned to the use of control towers as a way to manage complex global supply
chains. Industry verticals in which control towers
are being used today include automotive, aerospace,
electronics, paper, food and beverage, and industrial
manufacturing.
For the most part, control towers remain the province of large international shippers, which use them
to oversee far-flung supply chains across continents.
However, Haber has recently seen organizations setting up towers for specific regions, such as Asia. “Now
that people are [manufacturing] in a region and selling
in a region, we are seeing a trend with regional control
towers as part of a global network,” he says.
Even so, their use is still far from universal. Only
12 percent of respondents to a recent DC VELOCITY
reader survey said they were operating a control tower
or “command center,” another name for this type of
technology. When those respondents were asked what
they used their tower for, 86 percent said it was to
manage carriers, while 48 percent said it was to manage suppliers.
SETTING UP A CONTROL TOWER
Not surprisingly, setting up a control tower takes some
prep work on the 3PL’s part. “A customer’s require-
ments need to be captured in detail and in depth, and
properly documented with process flow maps,” says
Gonzalez Magán. “Service-level agreements, standard
operating procedures, work instructions, and varied
systems need to be set up.”
The contract logistics service provider generally
dedicates staff to the client when setting up a con-
trol tower. These staffers can then take delivery
requests, tender loads to carriers, track shipments,
and ensure that schedules are met to maintain supply
chain flow.
Besides providing pipeline management, the tower
can usually assist in benchmarking carrier and supplier
performance. “The customer gets exception reports on
how suppliers or 3PLs are performing,” says Haber.
Other services that a control tower can offer clients
include assistance with future scenario planning and
supply chain modeling, says Joe Carlier, senior vice
president of global sales at Penske Logistics.
One of the biggest advantages of a control tower is
its ability to react to changing events and take corrective action. If, say, a hurricane or tsunami jeopardizes a
supplier’s ability to fill or deliver an order, the control
tower can reroute the shipment or locate an alternative
supplier. “If somebody is going to have a disruption,
you can make a decision to redirect through a control
tower,” says Haber.
FREIGHT-SAVINGS PAYOFF
Because of the work involved in setting up a control
tower, 3PLs generally require multiyear commitments
from clients. Shippers usually pay for the service on a
transaction basis, as a subscription service, or a combination of the two.
As for the payoff, companies typically see savings in
transportation costs—a result of efficiencies related to
centralizing logistics operations in the tower. Kass says
that for a “mature” shipper, a control tower can result
in transportation savings of 5 to 10 percent, while a
company that’s never used a transportation management system (TMS) and centralized its logistics operations could realize savings of 15 to 25 percent.
Haber offers a more modest estimate of the potential transportation savings. He says an “undisciplined”
company could net a 12- to 15-percent savings from
a control tower. If a company has been doing a good
job with its transportation program, however, then the
freight savings would drop to between 1 and 3 percent.
Although freight savings can justify the investment,
most companies electing to set up a control tower do
so as a way to keep better tabs on their supply chain.
“Customers … see control towers as a value-added
service to simplify managing complex supply chain
logistics,” says Gonzalez Magán. “Due to this complexity, it minimizes the risk of not having products
on time to end customers.”
