The next big thing: 'Control Towers'

It is amazing how there can be a synergy that drives several parties to coalesce around the same idea. I once read about a crazy idea that if one cow learns how to cross a cattle grid this capability will somehow be transmitted to all other cows. Sounds pretty quirky right? Well somehow the notion of a supply chain control tower has gained broad interest lately across a broad spectrum of industries. I stole the title of my blog from James Cooke of CSCMP who wrote about the same topic a few weeks ago. James comments that:

In one notable session, for instance, a Procter & Gamble executive described the company's initiative to set up "control towers" to help it manage its distribution networks in emerging markets in Eastern Europe, the Middle East, and Africa. In the supply chain sense, a control tower is a location that provides visibility into inbound and outbound distribution flows—much as a control tower coordinates the movement of aircraft to and from an airport. Although a number of companies in Europe have adopted the control tower concept, P&G's case is particularly interesting because executives believe that this approach will help the consumer goods giant control distribution costs and manage supply flows into emerging markets.

I must admit that the last sentence left me wondering what the justification was for the other control towers?  It’s the ‘particularly interesting’ bit that I found a bit confusing, not that P&G expects real benefits from the control tower, which I would assume. From my perspective, the application of the control tower concept only to distribution is a fairly narrow use of a very powerful concept. A multi-tier control tower in the high-tech/electronics space that spans customer location, the OEM, several contract manufacturers, and component suppliers has much greater likelihood of both success and benefit.  Time and time again I hear about visibility being a problem in this environment.  What better way to get visibility than to have a single system that sucks in data from multiple systems of record (not just ERP) to provide this visibility? But visibility is not enough.  Don’t get me wrong, knowing about an issue is hugely better than not knowing about an issue until only after you feel the impact.  But even better than knowing about an issue is knowing about the consequences of that issue.  Will it affect customers service?  Will more material be required? Will we need an extra shift?  Will we miss the quarter?  Without this type of consequence analysis, knowing of the issue itself is relatively uninteresting and of little value (beyond the people directly affected that is.)

Even better, is to be able to perform "what-if" analysis to determine the best course of action to avoid the risks and negative consequences of events. But in a multi-tier, and therefore multi-organization supply chain there is no obvious ‘best way’ to resolve the issue in the best interests of all the participants.  There is a natural tension between the objectives of the different tiers that has to be negotiated. However, in a multi-tier supply chain, how do you determine who is impacted and who needs to take action? After all, without this knowledge how is resolution possible? I suppose resolution is still possible using conventional means – exporting data into Excel and emailing it around followed by several conference calls – but the time this takes is a primary cause for supply chain waste and inefficiency and the very problem that a control tower will solve…well, a control tower that goes beyond simple visibility anyway. Visibility is a start, consequence evaluation the next step, "what-if" analysis leading to resolution is the third step, and multi-enterprise collaboration the final stage and most complete description of a control tower. So what is different now?  Do we trust our trading partner more than we did two years ago? To be honest, I am not sure.  Perhaps it is that we are getting management coming through that is very familiar and comfortable with sharing information across the internet, the so called Millenials.  But, as I never tire of pointing out, we have been talking about control tower like concepts for 50 years ever since Jay Forrester published his work in industrial dynamics - "Industrial Dynamics-A Major Breakthrough for Decision Makers," in: Harvard Business Review, 1958, Vol. 36, No. 4, pp. 37–66 - and the bull whip effect in which he states that:

Company (and supply chain) will come to be recognized not as a collection of separate functions but as a system in which the flows of information, materials, manpower, capital equipment, and money setup forces that determine the basic tendencies towards growth, fluctuation, and decline.

For years, many analysts such as Lora Cecere while at AMR Research and now the rest of the Gartner supply chain people have been writing about demand-driven value networks (requires membership), which, while slightly different in concept, is all about pushing the demand signal down the supply chain across functional and organizational boundaries. Without a doubt, technical solutions have improved and lately even the concept of social networks has gained a lot of acceptance in the consumer community. But technology is the enabler, perhaps the driver too in some cases, for example Facebook. But we need to get well beyond the social graph provided by the likes of Facebook and the interest graph required by social media marketing to the responsibility graph required in B2B collaboration across enterprise boundaries. We need to get from ‘this is what is happening’ to ‘who needs to know.’ As I mentioned above, I do think it is the arrivals of the Millenials in the workforce, particularly in management positions, that is leading to the re-evaluation of existing inter-company processes. This combined with the huge adoption of social networks applications such as Facebook and Twitter in the consumer space has opened the curtain just a little.  I think we have some way to go before this all gels into something really significant, but it is very exciting to be part of the process, to see customers and prospects exploring control towers and making the first steps to meaningful adoption, well beyond simple visibility. And there is a significant body of discussion on the use of social media in the supply chain, such as Sameer Patel’s blog titled “Talking Collaborative Supply Chains at Enterprise 2.0 Conference” in which he states that:

Supply Chain efficiency is a big big deal. More over, this area of the enterprise technology stack and associated strategy has seen little to no innovation for well over a decade

Well, I am not quite sure of that, but the pace of innovation has sure slowed down, especially in the area of collaboration, particularly multi-tier collaboration.  In the blog above Sameer refers to an earlier blog he wrote on 2009 titled “Taming the Supply Chain beast, Enterprise 2.0 style” in which he states that:

… one of the biggest opportunities to enterprises using such social computing technology is be able to pry open the gates that lock out supply chain access to core processes such as product management, R&D, marketing, end customer support, etc. And conversely – giving these business units access to knowledgeable supply chain partners as well.

First of all, I find Sameer’s description too narrowly focused within the enterprise whereas I believe the greatest benefit to be achieved is from collaboration between enterprises. Second, I find that the lack of innovation has been on the part of the user community.  The activity in control towers is a clear indication that this has changed.

Additional Resources

• Supply chain control tower frequently asked questions