How to Build Your Logistics Control Tower

Posted by Martin Verwijmeren on Jun 20, 2015 6:43:00 AM

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Picture yourself stuck in a traffic jam between fellow luxury cars and glass trucks. In today’s logistics world this would not be a pretty sight.

Suddenly you would realize that 1 out of 3 trucks is empty and the rest is only loaded to 60-70% of its capacity. If these trucks and trailers were to be really made of glass the cause of our sufferings would be instantly made visible.

Supply Chain Orchestration - Control Tower 2017 v01 BW.jpg

Combining order flows to fill trucks could change our lives:

  • It would substantially reduce our commuting time.
  • Instantly lighten up our day and lower our level of traffic aggression
  • In addition we would save a lot of money on logistics
  • Most importantly, society would enjoy a greener planet

Logistics Control Towers emerge everywhere

Companies are currently implementing Control Towers right across the logistics landscape. A platform is growing where information about various flows of goods converges and is analyzed so that the freight flows can be optimized. This will have a huge impact on both our environment, economy and mood.

Prerequisites for a Logistics Control Tower

The mechanism behind Logistics Control Towers is to optimize order planning and centralize logistics planning and reduce the number of empty miles of transport resources. Control Towers are also increasingly used as Cross Chain Control Centers (4C) in order to combine several product flows from multiple companies by order consolidation.

Four important prerequisites need to be met:

1. Operate Logistics at a Global Level

Unfortunately many companies still plan their logistics at the very end of their local supply chain. As a result supply chain planners are only focused on logistics orders leaving their own facility. They pay no attention, or simply lack the tools, to benefit from potential consolidation advantages by combining shipment volumes with other facilities. Local planning of logistics exposes companies to a real risk of sub-optimization.

The way to go is to centralize logistics planning by accumulating local planning to a higher (enterprise) Control Tower level. Several delivery plans can run simultaneously and the impact of planning changes is immediately visible. Transportation will start with full loads as always, but the average distance between the first and the last delivery reduces.

On estimate, 10% efficiency increases can easily be reached by reducing empty mileage

2. Execute the Supply Chain with Collaboration

Once companies have centralized their logistics planning internally, the next step is to collaborate with other companies on organizing deliveries. Within the confines of traditional methods, companies will eventually exhaust the possibilities for efficiency gains. That’s why a growing number of companies are also looking at horizontal collaboration kilometers when less than full.
 
The fundamental idea is that companies can operate more efficiently and effectively by doing similar activities together. That leads to lower costs and higher margins. Companies might even be able to expand their markets.”
 

3. Build Trust among your Partners in your Control Tower Network

To make your Supply Chain Control Tower work, “trust” is an essential factor. Companies can gain substantial economies of scale by identifying and synergizing similarities in their flows and join forces. Combining flows lead to fuller trucks, lower costs and reduced carbon emissions.
 
Companies who are no direct competitors can gain a lot by identifying similarities in products and logistics characteristics as well as mutually contracted LSP’s. Trust is the most important prerequisite for collaboration of this kind. If companies involved no longer feel comfortable with the arrangement, the collaboration won’t last long.
 
So to make horizontal collaboration work, companies need to place great importance on EU competition law and make sure clear agreements are in place about information sharing within the applicable legislative framework.
 

4. Implement Fair Share Mechanisms

 
The fourth and largest component of an effective control tower is agreeing on how to split the cost benefits. A collaboration project between two companies can easily generate 20 different sharing mechanism options. If the will and trust between companies to collaborate is there, the first obstacle they face is the lack of intelligent tools and planning techniques for exchanging information and connecting their processes in order to share benefits. Also a system is needed to keep collaboration legally compliant to prevent arousing suspicion of cartel agreements.

Start building your Logistics Control Tower now

Imagine your glass trucks filled to its optimal capacity, not encountering any traffic jams and delivering always on time. Wouldn’t that be something… For sure this is utopic. Still huge steps can be made by joining forces through Logistic Control Towers.

Want to start improving your Control Tower? Download our Control Tower Checklist below.

Digital Control Tower Check List

 

Inspired by and content derived from: Supply Chain Movement, Control Towers are emerging Everywhere, Marcel te Lindert.

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