Each time you take a product home from the store, you are at the end of a remarkable series of events. The modern supply chain is complex, efficient and, too often, one false step away from disaster.
How do brands, manufacturers, distributors, retailers and myriad other participants each play their part at just the right time? Increasingly, it’s thanks to a new breed of tool known as the supply chain control tower. Bringing together software and multiple channels of communication, these control towers give logistics managers a bird’s eye view across every moving part. Here’s a glimpse into how they work.
The Supply Chain Control Tower and Logics Complexity
Over the past 15 years or so, ERP, inventory, and logistics management systems that were built for integrated companies have struggled to keep up with a world where supply chains are complex, distributed and span many companies operating in different countries. The job of corralling each of the parts of a modern supply chain has been challenging for traditional software, which has led to the emergence of a new tool: the supply chain control tower.
The airport control tower is a great analogy for the role software needs to play in today’s supply chains. An airport’s daily operations require thousands of people. Independent companies and individuals each own a specific part in the smooth functioning of the airport. Airlines, baggage companies, security, bird frighteners, runway debris patrols, and more: each must be orchestrated within tight time windows and to exact specifications.
The control tower is at the heart of making these disparate actors come together for the safe and efficient running of the airport. In the control tower, all necessary information comes together to enable humans to make the right decisions.
Modern manufacturing is surprisingly similar. Unlike those of 20th-century conglomerates or the oil companies, modern supply chains involve multiple global suppliers. Indeed, what we think of as a manufacturer is often more a coordinator orchestrating multiple global suppliers in the design, testing, fabrication, distribution, and sale of products.
While globalization has helped reduce costs and increase efficiencies in some areas, it has complicated matters elsewhere. According to Accenture, one way US companies are coping is by holding onto increasing amounts of inventory. That not only increases storage and security costs but it also ties up capital that was supposed to be freed by just-in-time manufacturing. In Europe, 20 to 30 percent of trucks on the road are empty, according to Tom van Woensel, professor of logistics at Eindhoven University of Technology. The rest are just 60 to 70 percent full.
So, how do modern manufacturers utilize all their available data together to make the right decisions? How do they inject value into a global network of suppliers at just the right moment?
Use Case: Supply Chain Control Tower Delivers Efficiency
Imagine a U.S. furniture manufacturer that started out in Oregon and then bought up competitors across the country. Recently, they purchased a competitor in Pennsylvania and their supply chain now looks like this:
- Lumber yards(Washington state, Oregon, Pennsylvania and northern California) provide unprocessed logs.
- Wood processing plants(Oregon and Pennsylvania) take the unprocessed lumber to produce uniform timber planks.
- Factories(Oregon, Northern California and Pennsylvania) manufacture furniture from the processed timber.
- Wholesale and retail distribution centers(throughout the US and Canada) are the final destination for the manufacturers’ supply chain.
A fleet of trucks hauls lumber, timber planks, and finished product across the country. At each point in the supply chain, decisions about when and where to send trucks are made by people who see only their part of the chain. Without a supply chain control tower and effective communication, it’s almost impossible for this to run efficiently.
Suppose the company supplies a retailer in Wichita, Kansas, and another in Oklahoma City. Both retailers make orders and, a few days later, one truck sets out from the Northern California factory to Wichita and another heads off from the Pennsylvania factory to Oklahoma City. Neither truck has other stops along the way and each is just 40 percent full.
Sure, the retailers’ sales managers could communicate directly with logistics managers at the factories to prevent this, but that would quickly become unsustainable across hundreds of orders a month. A supply chain control tower could automatically flag that a single truck could be sent at 80% capacity and, after unloading at Wichita, head 160 miles south to make a second drop in Oklahoma City.
So, how would this work? Follow this scenario:
- Mike, the buyer at the Wichita store, calls his rep in Northern California to place an order. To Mike’s surprise, the rep offers a discount on the delivery charge if he is willing to wait until Friday for his order. He gladly accepts.
- couple of days later Christine, the buyer at the Oklahoma City store, calls her rep in Pennsylvania. She makes her order and books the delivery for her usual Friday afternoon time slot.
So, what role did the supply chain control tower play here?
When the Northern California rep entered Mike’s order, the supply chain control tower had enough data to determine that Christine is 95 percent certain to make an order for Friday. Mike’s orders are less predictable. The system can predict how much money would be saved by combining the deliveries, making it easy for the rep to offer Mike an incentive to delay his delivery while the company fulfills its regular shipment to Christine.
Communications as Enabler of Logistics Efficiency
No matter how capable the software, a supply chain control tower is only valuable if its source data is accurate and timely. Across thousands of moving pieces, different technologies each play specific roles. RFID (radio frequency identification) helps keep track of stock movements in warehouses and very low power radio devices enable real-time communications across, say, an entire factory site.
Out on the road, though, communications and the cell network come into their own. Using features powered by a cloud communications platform, the control tower software can collect valuable location data from mobile devices scattered throughout the supply chain. Logistics managers can stay in touch with drivers and loaders-almost no matter where they are-through chat, text to speech calling or SMS.
Each of the furniture manufacturer’s trucks, for example, can be instrumented: data including speed, GPS coordinates, payload weight and so on are constantly measured and fed to an Android device in the cab. Every few minutes, the Android device sends these measurements back to the control tower. How it sends them depends on where in the country the truck is at that moment.
In cities and on popular highways, the device can connect with the control tower directly using 3G or 4G. But in remote areas such as parts of Nevada on I-80 no such coverage exists. In those instances, the device sends good old fashioned SMS messages via the control tower’s cloud communications provider. While SMS reduces how much data can be sent, it’s the baseline that’s available wherever there’s cellular service.
Using that data, the control tower can warn the customer of any delays, all without any interaction with the driver. On the flipside, the control tower can warn the driver of upcoming road or weather issues. Of course, it’s not safe for the driver to read messages while driving, so the control tower uses its cloud communication provider’s text to speech calling features to place a call that the driver can accept hands-free. And all the while, the logistics managers can maintain a “god view” of their network, thereby avoiding costly redundancy.
SMS and Voice Communication Still Key in Logistics Management
Supply chain control towers are transforming how products get to market, and companies such as Flexport are turning international logistics into an API-based service that integrates with their clients’ existing systems. At first glance, this may sound like an innovation enabled by the internet. However, while the internet is at the core of what makes supply chain control towers possible, it’s actually more a story of how multiple communication methods come together at the right moments. SMS and voice calling still play a vital part in a world otherwise dominated by API calls over the high-speed internet.
So, the next time you leave a store with a bag of chips, a new phone or even a wood dining set, think about how many messages, calls, and bytes of data went into getting that product into your hands.