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Control Tower: Being in control of your supply chain

Long before a control tower was only known in the airline industry. Having a view of everything which happends with the airplanes at the airport, and direct them to their appropriate spots and ensure that everything operates according to procedure.

In the last couple of years the term Control Tower became common in the logistic sector, however there are different interpretations of the concept.

What is a logistic 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.

What is the difference between a control tower and ‘good old’ 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 logistic service providers is collected and stored in a structured way; it is 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 analyzing the supply chain.

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

What are the typical benefits of a control tower?

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

  • Savings on logistics costs
  • Reduction of inventory
  • Improvement of service levels such as total cycle time and on-time delivery

Successful Supply Chain Visibility solutions are deployed around five leading practices which enable an organization to achieve an end-to-end view of inbound and outbound operations:

Integrate and aggregate key information from inside and outside the enterprise such as key order, shipment, and inventory information from all (internal) ERP, TMS, WMS and other inventory planning systems from every stakeholder in the supply chain.

Reduce total landed costs by tracking product, freight and insurance costs as well as integrating trade compliance information such as duties, tax, VAT and other governmental charges. When integrating this information with the repsective sales- and purchase order, you would save time by re-entering all the costs in the ERP system, and it would give you more insight at the same time of the overall margin per product.

Use a repository of supply chain data and develop scorecards to manage supplier compliance, or transportation booking performance etc. to continuously improve global operations. By integrating all stakeholders, this information will be available real-time, and exception events can be triggered.

Gain the CFO and finance organization’s support by extending the visibility solution to include financial settlement and financing triggers. By having a control tower, including contract management for all transport related costs, it can easily manage the transport invoices and detect discrepancies. All the correct invoices will be automatically matched, thus saving time for the finance department.

Configure visibility  tools and solutions for Sarbanes-Oxley (SOX) risk mitigation and disaster recovery in order to recover effectively from risk related events.

Who can benefit with the use of a Control Tower?

In principle all stakeholders in the supply chain can benefit from using a control tower. Of course this is only possible with a proper integration of the entire information flow. By using events, everyone can be notified of deviations in the process.

Who uses a Control Tower?

Both shippers (manufacturing, wholesale/ distribution companies) as well as logistic service providers can make use of a control tower. Benefit for a logistic service provider, is that they can use it for multiple customers at the same time. This will reduce the cost for their customer, whilst at the same time develop more customer intimacy. They will be able to provide more services to their customers. With this the logistic provider will become THE partner for any related transportation topic.