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The Supply Chain Control Tower
Martin O'Grady, Outsource Management Services Limited
The Control Tower Concept
The reference to control towers often puts one in mind of aviation, as would a mention of the bridge bringing forth thoughts of the nautical world.
It is becoming more common nowadays to hear of Supply Chains having Control Towers, an evolution from Central Planning which, in its origins, was about delivery completeness, trailer counts, locations and so on. For warehouses it was similar and included orders dispatched, nil stocks, absence and the like.
Readers of a certain vintage are hopefully smiling ruefully at the accuracy of their answers in days gone by, "What are you reporting it for? We'll have it sorted for lunchtime!" Reporting to central was important and enabled decisions to be made with a full picture which would see resources allocated appropriately and all options considered in light of what would best suit the network.
In today's world, it is a luxury for a warehouse operation to carry over orders and plan a day with full visibility of the workload. Expectations and service levels have moved on dramatically and the need for real time information is now business critical.
Measuring Units per Hour versus Efficiency
Warehouse resource planning in the old days was done using Units per Hour (UPH) and there are still a good number of operations using the same method today. The immediate danger here is that the operator continues to be blind to the real potential of their site because UPH is simply a guide. This is fine but it wouldn't be something upon which you would want to build a multi-million cost budget.
Measuring efficiency, however, against a robustly established target provides a much more powerful perspective. The value of knowing your efficiency levels by introducing a measured environment can dramatically impact the company's bottom line. Without process improvement, which will deliver more benefits, the simple act of introducing a measured work environment will reduce costs by at least 10%. Resource forecasting too will reap dramatic benefits.
Being fleet of foot in supply chain terms is vital to create and maintain a competitive advantage. This has led to an increasing appetite for investment in systems, management training and staff engagement.
Looking Ahead to the Future
Knowing the numbers in real time, having the quality of management resource to interpret and react, and a workforce willing to flex and bend to meet demand is a tall order as volumes, speed of service and complexity increase, not to mention legislative and environmental demands.
So, you have the numbers - but which numbers? You have the quality of management resource - but do you really? How do you measure that? You have the flexible workforce making it happen - using what metrics?
The Control Tower - it is a great idea but not one that is easy to qualify or quantify to be in a position to see all and to be preemptive. Aviation control towers act as planning and prevention tools and will intervene in real time to avert disaster or change course. For a Supply Chain Control Tower to truly function it needs real time data that is measuring relevant Performance Indicators and providing operators with sufficient information to be in a position to make preemptive decisions.
So, your executive has bought the idea from you - it does make sense after all - so, where do you start? Here are the questions that you need to be asking yourself:
- What information should you gather?
- How should you gather this information?
- How frequently should you want to see reports?
- Do your current systems support the principle of the Control Tower?
- Is today's data historical or real time?
- In what circumstances should you look to intervene?
- What exactly will the Tower improve?
- How do you prevent a Tower from being perceived as an Ivory one?
- Is there a system out there that could hold the data centrally?
Using the Control Tower
One way to start to use the Tower to best effect is to introduce some internal benchmarking - comparing apples with apples is essential if it is to be credible to all participants. Measuring efficiency as opposed to UPH is the key to enabling these comparisons.
While service standards and stock accuracy are much more straightforward to measure than costs, whoever determines the core headcount generally holds the key to overtime and spending on agency staff. These are the areas which, more often than not, will need to flex to meet demand.
Furthermore, the management and containment of cost has a direct and immediate impact on the firm's bottom line. Efficiency measurement remains the old true way to compare employees, departments, sites, networks and geographic territories, yet inexplicably, it is currently the least explored method in the Supply Chain.
Horizons vary and are dependent on the seniority of the reader - the more senior you are, the longer the time frame and the more high level the data. With a functioning Control Tower in place, the senior executive gets a panoramic view of their supply chain's performance on a global scale, sees trend reporting and can ask searching questions with precision.
The Control Tower also enables a time poor executive to focus their attention and establish areas that need attention. Red lights on the dashboard caused by any of those three critical elements - numbers, management or workforce - now the answer can be seen clearly.
Martin O'Grady has spent nearly all his career in supply chain, latterly with 2020 Group in the UK. Martin was responsible for Logistics and IT with operations in Spain, Sweden, France, Benelux, UAE and UK. He led 2020 Mobile Group's global ERP rollout of Oracle JD Edwards and was responsible for a number of e-commerce B2C propositions in the UK. He is a fellow of the Chartered Institute of Logistics and Transport in the UK. Currently, he is building his own practice specializing in Business Intelligence for Supply Chain Logistics and is launching his new Oracle based platform in January 2014. Martin may be contacted at firstname.lastname@example.org.