When It Comes to the Control Tower, Optimization Is Key

The supply chain control tower is a concept that borrows heavily from air traffic control towers. As you know, airport control towers have visibility into all airborne traffic, and help prioritize aircraft for landing or take-off. This concept has been used to underscore the point that a similar type of control tower is needed to manage your supply chain as well. The associated, implicit (and sometimes explicit) message is that you can manage your supply chain simply by looking at a couple of key metrics on a dashboard or spreadsheet. What’s wrong with this picture?

Let’s take a closer look at the control tower analogy. Air traffic control towers are great at directing traffic at a couple of crucial points in a flight: the take-off and the landing. But managing a flight is not just about taking off and reaching your destination, it is about reaching your destination in an optimal manner. This could be determined by several factors such as using a minimal amount of fuel, avoiding turbulent weather, minimizing flight delays, not flying too high, not flying too fast, etc. As you can imagine, there is a large set of variables that can – and need to – be optimized to accomplish this. Sophisticated software is used behind the scenes to optimize the entire set of flight systems. This powerful technology is what enables air traffic controllers to focus on the situations where human judgment counts most – the take-off and the landing!

Supply chain software should be viewed in a similar vein. It sounds tempting to manage your supply chain planning process by simply responding to every situation, but that approach can be challenging from a resource standpoint. A supply chain control tower provides visibility across many business functions, and with human oversight, it can be a very valuable tool in taking corrective action when disruptions occur. But is a supply chain control tower alone sufficient?

To get the most value out of a supply chain control tower, it’s important to employ optimization capabilities to help you manage many of the supply chain challenges you face. In the era of global supply chains with interconnected nodes, a decision taken in one node of the supply chain has implications for the rest of the supply chain grid. For example:

  • In highly seasonal consumer goods companies, should manufacturing be done ahead of the season (which can result in inventory-carrying costs) or just-in-time (which could result in overtime costs)?
  • In high technology industries where demand can fluctuate wildly, but labor capacity is a key constraint, what is the best way to meet demand while keeping labor capacity evenly utilized?
  • When companies hold products in inventory in anticipation of customer orders, what is the best location to maintain inventory? Deploying inventory too close to the customer location (e.g., a local warehouse) carries the risk of needing to re-deploy that inventory if the demand does not materialize; holding back inventory at an upstream node (e.g., a regional distribution center) allows the deployment decision to be postponed, but incurs additional lead time.
  • When growth in demand outpaces growth of supply chain capacity, which customer segments are most profitable to serve? What supply chain postures are most optimal for the various customer and product segments of the portfolio?

These important decisions can be managed via the “rule of thumb” principle if you are working at a small company that has a small product portfolio and serves a small customer segment. However, for larger, multi-national companies, or those experiencing rapid growth, these decisions must be taken across hundreds or thousands of finished products, at dozens of locations, impacting many different customer segments. In such conditions, where the supply chain complexity is quickly magnified, deploying optimization technology can deliver significant results. Companies using optimization technology have seen substantial percentage improvements in metrics like profitability, on-time delivery, fill rates, capacity utilization and inventory turns when compared to rule-of-thumb decision making and manual planning.

A supply chain control tower works best when it complements an optimized baseline plan, giving you the best of both worlds. It allows you to be confident that human judgment is not making a bad plan worse, but instead is making a good plan great. Learn more about JDA’s supply chain control tower technology, and how it works to complement your optimized supply chain plan for even better results.

Additional recommended resources:

How to prepare for future changes in manufacturing planning

How to deliver an always-on supply chain

How manufacturing planning can help you profitably address supply chain complexity

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