Expert Insight: Guest Contribution

By Greg Johnsen ,
EVP Marketing & Co-Founder,

GT Nexus

Date: February 25, 2010

Supply Chain Comment: Your Global Supply Chain Control Tower Has A Memory

How Valuable Is A Control Tower To Day-To-Day Operations?

One of the important but often overlooked aspects of incorporating a global supply chain "control tower" into your operations is the extensive and detailed history of supply chain information that accumulates as a result.  Control towers are electronic systems for gathering and distributing information that enable their operators to see farther and detect risks (or opportunities) sooner. Essentially, they allow supply chain managers to make better business decisions.  But these systems also hold vast amounts of information.  Over time, they can become a company's electronic "memory," holding a comprehensive record of supply chain events and transactions that occur beyond the four walls of the company.  Every product ever ordered from a supplier; every shipment ever shipped to a customer; every document ever created; every cost accrued; every event generated in the flow of product from order to final delivery is captured, organized and stored in the tower.  The tower is a rich store of truly useful supply chain information. 

For day-to-day operations, it’s clear just how valuable a control tower strategy can be.  A company's ability to "control" operations by seeing more, and seeing sooner, has become a well-accepted tenet in good supply chain management. To operate without one today is equivalent to navigating "in the dark" -- without sight, and without instrumentation.  Companies that choose to operate without a control tower put their businesses at risk. 

But it this other aspect -- the accumulation of data and information over time -- that is so powerful.  How do you improve your decision-making capabilities in the larger, structural areas of your supply chain that can unlock enormous new value?  How do you know when it makes sense to change sourcing strategies, shift supplier allocations, modify commercial terms, re-engineer a logistics process or swap out a logistics partner?  In order to make these larger structural changes, supply chain managers need rich and detailed supply chain information. The information must be standardized so it can be quickly and easily tapped.  But for all the innovative software reporting tools and business analytic environments available in the market today, none will deliver without the store of unified information that a global control tower has already gathered together.  With good information, any number of a range of powerful business analytic environments can be fully leveraged.  Information plus analytics leads to Insight.  Insight leads to change.  Change drives value. 

But let's skip ahead a bit.  Let's assume you have a global supply chain control tower in place.  Let's further assume that you have begun to tap the information in this tower to drive a range of powerful new analytics about your business.  You have a report that shows the total landed cost of every product you have ordered, including a breakdown by cost category, and how these costs have fluctuated over time.  You can segment information by supplier, by region, by time of year, by mode of transport, and by carrier. At this point, you have only begun to tap into the power of this information base. 

Because you have such rich and detailed historical information about your supply chain, you can begin to do very sophisticated modeling to make predictions at the daily "operational" level.  Let's look at the notion of a dynamic ETA, for example.  Estimated time of arrival is crucially important piece of information that often changes over the transit-time of a shipment of goods. Supply chain control towers are very good at accurately predicting ETAs based on what is actually happening in areas of the supply chain that are not always so easy to see.  A delay in Customs for just one shipment that was triggered by incomplete declaration documentation causes a ripple effect of downstream delays that impact receiving and labor planning at the distribution center a week later.  Control towers monitor these delays and revise ETAs and alert anyone along the line with a need to know that there will be delays and when product can now be expected.  In these cases, the control tower acts as a dynamic ETA engine.  The revised "intelligent" ETAs are streamed to users throughout the supply chain, including customer planning or warehouse management, to supercharge those systems with better, more up-to-date information. 

But what if you were now able to augment this "intelligent" ETA to include a certainty factor?  The certainty that the ETA is correct?  To do this you would need a wealth of past performance data on which to calculate, statistically, the probability that the current ETA -- for this product, from this supplier, moved in this way, at this time of year -- WILL arrive as stated.  You have ETAs that are revised "intelligently" as product moves through the supply chain, but you also factor in an element of predictability, based on historical data and statistics. The end result is that you have stunningly reliable information. It doesn’t stop there. You can use this same construct for predicting supply chain costs.  That landed cost analytic you've been using gets an upgrade, now.  Not only do you see the actual "real time" cost stratification of every product moving in your supply chain, but you see the "probability" that the cost categories will remain in line through the end of the move, or through the end of the month, or quarter. 

Global supply chain control towers are powerful operational centers, and their use is fast becoming a pre-requisite for good supply chain management. But we will soon see companies using them in totally new and innovative ways to achieve a much a higher level of supply chain "intelligence" and insight going forward.  It's all about the information. 

Agree or disagree with with our guest contributor's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.

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About the Author

Greg Johnsen is executive vice president of marketing, and co-founder of GT Nexus. Mr. Johnsen has more than twenty years of sales, marketing and product management experience with Silicon Valley technology companies. He has spent the last ten years focused on supply chain and logistics, working with hundreds of leading companies to drive sustainable improvements in global sourcing, transportation management, inventory control and a range of international operations. Prior to GT Nexus he was with Scopus Technology, an early leader in the customer relationship management software domain. He began his career at Ingres Corporation, a pioneer in relational database technology. Mr. Johnsen has a Bachelor of Arts degree in English from the University of California at Davis.


Johnsen Says:

With good information, any number of a range of powerful business analytic environments can be fully leveraged.

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