For global consumer packaged goods companies burdened with complex supply chains, having overarching and real-time visibility across divisions, modalities and countries is critical. The recent global crisis has exacerbated the need for a holistic supply chain solution that can respond intuitively and adjust instantly to fluctuations in demand, and absorb shocks from unpremeditated events. In our 2020 supply chain impact survey, over 57% of our respondents reported at least a 25% reduction in their supply chain operations with 48% citing warehousing and distribution as one of the key areas disrupted by the ongoing pandemic.
With most CPGs grappling with shrinking margins, the pressure on the supply chain to cut costs is more intense than ever before. A robust, responsive and digitized logistics control tower ignited by predictive analytics offers unmatched transparency and phenomenal efficiency, agility, resilience, visibility, and financial returns. It can act as a formidable information lighthouse helping the industry navigate choppy waters and achieve faster course corrections when faced with unforeseen events.
The concept of “control towers’’ that can act as a centralized and strategic information hub has been present in the logistics parlance for a while now, but, its real potential as a value creator and profit center hasn’t truly been harnessed and unleashed yet. So, what goes into the mix to create the ideal control tower and what are the payoffs?
Building a Digitized High Command Center
A logistics control tower is much more than the traditional freight management desk. It is an information powerhouse fuelled by a tempered symphony of technology, processes and skilled operators, tightly aligned with strategic objectives to provide comprehensive visibility over the entire supply chain.
Data from suppliers as well as logistics service providers on the status of orders, inventory and shipment is gathered and incorporated in a structured manner to an interactive dashboard that enables informed decision-making while planning, monitoring and analyzing the supply chain, allowing the early detection of risks and opportunities. This also simplifies the prediction of supply-demand variations and optimizes the deployment of inventory or the storage of raw materials at an upstream node.
Control towers can be set up in-house or outsourced and are best served for global organizations with inter or intracontinental scope. To set it up internally, the blueprint must be drawn with the right mix of talent. Organizations need to invest in an A-team of supply chain and business intelligence experts, supported by technology partners, and 3PL and operations specialists.
According to an Accenture report, companies like Unilever and P&G have reaped incredible financial returns by investing in logistics control towers with reduced inventories in excess of $500 million by 25 to 40%, lowered delivery costs by 10 to 20% and shrunk labor costs by 20 to 30%. Unilever, in particular, owes its consistent top Gartner global supply chain rankings to its innovative logistics and sustainability approach.
Reactive to Predictive: A Seismic Shift
Today there is an exponential rise in digital and direct-to-consumer sales with on-demand and same-day shipments taking center stage which necessitates real-time visibility into order status and on-time delivery at reduced costs. To meet customer expectations and stay ahead of demand, a complete transformation of the distribution model must be undertaken.
In my view, there are 5 core areas in which intelligent and collaborative logistics can really make an impact:
- A unified cloud-based platform can aggregate the data from different embedded telematics fitted in carriers to the centralized control tower allowing what-if forecasting and simulation for tactical planning- resulting in the reduction of deadhead miles and fuel costs, and improving overall fleet efficiency. Smart transportation will also enable predictive lifecycle management by forecasting failures and scheduling maintenance checks.
- Generally, enterprise-wide systems such as warehouse management systems (WMS) focus either on the planning or execution stage. Control towers can provide a comprehensive view of all inventory, all orders and outbound and inbound flows at every stage of the order fulfillment.
- A connected fleet, powered by geo-location sensors and IoT can transmit real-time data on location with real-time traffic updates, enabling intelligent route optimization and re-evaluation of available alternatives, minimizing opportunity costs.
- Digitized control towers shatter the traditional operational silos by enabling standardized invoicing and providing a clear and consolidated view on all types of costs; procurement, handling, storage, transport, customs etc., thus making cost control more effective.
- An integrated WMS, supported by electronic data interchange, RFID sensors and cameras tagged on inventory can feed into the logistics control tower crucial information on pallet condition and utilization. This data can be vital for predictive maintenance analytics and help realize the elusive ‘dark warehouse’ concept that envisions a fully automated material handling and storage system.
Secret to Amazon’s Success
Amazon’s logistics and supply chain system is a great case in point. It is no secret that the retail giant has one of the most well-oiled supply chains and logistics systems in the world which has contributed immensely to their remarkable growth story as the fastest company to reach $100 billion in revenues.
An impressive hallmark of Amazon is their lightning-fast ‘same-day deliveries’ and the plethora of delivery options they provide their customers. What makes this possible is their sophisticated multi-tier inventory management system plugged into an extensive network of strategically-placed warehouses and fulfillment centers that are supported by an army of over 45,000 robots from Amazon Robotics that pick and pack orders, slashing cost and time. Their seamless partnerships with multiple delivery partners such as FedEx and UPS gives them splendid logistical muscle power.
The revolutionary Amazon Prime Air is in the making that will deploy drones to deliver packages and they have also recently revamped their inventory communication strategy with vendors with a new probability demand forecasting feature. Having mastered the application of control towers to their own global infrastructure management, Amazon now provides a cloud-computed platform to businesses in the form of Amazon Web Services (AWS).
With their bold strategies and penchant for innovation, Amazon has rapidly paved its way to the top of the retail pecking order, leaving competitors scrambling to catch up. Other organizations should take a leaf out of their book to think out-of-the-box and embrace cutting-edge technology to transform their supply chains.
The Bottom Line
Digital technologies when mobilized correctly, can enable error-free and pro-active management of stock and asset lifecycles. Some clear benefits of a well-structured smart control tower are manifold, or, in fact tenfold:
- Faster and more proactive event management
- Reduction in logistics and handling costs
- Better management of inventory and spend
- End-to-end supply chain visibility
- Enhancement of service levels
- Breakdown of operational silos
- Accelerated delivery cycles
- Collaborative information sharing
- Improved partnerships between supply chain and 3PLs
- Sophisticated decision-making and supply chain analytics
CPG companies must explore digital maturity across the entire logistics value chain to improve operational efficiency and customer experience. According to the World Economic Forum, control towers can generate savings of $210 billion in operating costs for logistics companies through 2025.
These digital lighthouses can provide a potent return on investment, invaluable prescriptive analytics and operational insights to aid strategic decisions, illuminating the path to the future for the logistics and supply chains industry.
Partner, Infosys Consulting
Andrew joined Infosys Consulting in 2020 and heads our Consumer Goods, Retail, Logistics (CRL) practice globally. He is a lifelong consultant with over 30 years of experience driving large transformation programs and high-value consulting work. Andrew has a stellar track record in the turnaround and monetization of practices, holding senior leadership roles previously in EY, Accenture, and Manugistics. A regular speaker at the University of Stanford, Berkeley, and University of Washington, Andrew is often featured in publications like the Wall Street Journal, Logistics Journals, and various industry analyst reports. He is been featured on the NBC Nightly News as an industry expert quite a few times. He is also a regular speaker at retail and supply chain events such as Oracle Retail Executive Forum, SAP Retail Executive Forum and USC Global Supply Chain Conference. Andrew is an alum of Seattle University, where he completed his mechanical engineering degree, and the University of North Carolina, where he received his MBA.