As we recap the year, we can’t miss one of our 2018 highlights: a joint Professional Development Event with the APICS Golden Gate chapter. We welcomed members and guests to our SF office in November to discuss “Implementing a Shared Supply Chain Control Tower.”
In supply chain management, the function of a “control tower” is similar to its namesake in aviation. It provides visibility into the movement of products and “directs traffic” to optimize operations. The concept has been around for many years, but primarily focused within a company’s own four walls.
A control tower that is shared across trading partners, including manufacturers, suppliers and retailers, can unlock even more value. By serving as a single source of truth and fostering trust and collaboration across enterprises, it enables all parties in the supply chain to achieve goals like reducing costs and improving customer service — beyond what any one party can achieve on their own.
For example, consider a manufacturer that’s looking to reduce working capital and decides to decrease its working inventory. When a demand spike occurs, they don’t have sufficient safety stock to cover it. They have to quickly place a large order, passing on the the demand spike to their supplier. The supplier then increases their inventory levels to handle these shocks, and subsequently increases prices to protect their margins. That increase translates to higher Cost of Goods Sold for the manufacturer, so while they may have reduced working capital, they are paying for it in another way.
Many will recognize this illustration as the bullwhip effect. The result in a zero sum game as costs simply get shifted around and companies see limited, short-term benefits. By contrast, if manufacturers and suppliers work together, quickly passing on information when demand or supply changes occur and taking into account mutual inventory levels to form a joint response, they can both improve working capital and costs. A shared supply chain control tower can break the deadlock of companies optimizing on their own by driving collaboration, leading to more value for all partners.
To achieve this vision, a shared supply chain control tower should include:
These features help overcome one of the first challenges companies come across when embarking on any visibility project: gaining partner buy-in to share the required data. The concept of a shared control tower makes data sharing a two-way street. By providing transparency into the analytics that drive recommendations for improvement, it facilitates collaboration toward common goals.
Digital supply chain capabilities also make the insights from the data actionable, so partners can see clear value from data sharing, without significant additional resource investment. Companies implementing shared supply chain control towers have realized benefits ranging from faster crisis response to elevated supplier relationships to reductions in expedited shipping costs and inventory carrying costs.
So does a shared supply chain control tower make sense for your business? Below are a few questions you can ask to help determine if it’s a good fit for your company.
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