The jury is in. There’s simply no question that a supply chain control tower will help businesses save money and increase their margins. The World Economic Forum estimates that on a global level, control towers could generate savings of US$210 billion in operating costs for logistics companies through 2025.
The challenge, of course, is to convince your executives that those savings will apply to your company too. A recent survey of business leaders by the business consultancy cognizant found that only 9% of respondents were supply chain “progressives”. For various reasons, there’s resistance to change. So how can you convince your boss it’s worth the investment?
Here’s a few thoughts about how a supply chain control tower could help you claim a slice of that US$210 billion.
1. Less Inventory
Any supply chain professional would spend at least part of their day trying to minimise inventories, which cost money to procure and store. Profits also take a hit if a company has to sell a product for less because there is too much of it sitting at the warehouse.
A well-managed logistics control tower will give a company the visibility to see what’s selling and what’s not. It allows a business to optimise its planning, and to keep excess inventory to a minimum.
2. Transport Optimisation
In many markets, the control tower is used to optimise freight. For example, it might be used to map out the most efficient “milk run”, which means each driver makes the maximum number of deliveries before returning to the warehouse. A truck that would once have delivered five packages could instead deliver seven or eight, and this can lead to cost savings of up to 20%.
In fact, the World Economic Forum suggests freight companies might be the largest beneficiaries of control towers, with an estimated US$520 billion of potential savings in operating costs over the next decade.
3. Less Premium Freight
In supply chain management, using premium freight is bad news. It means the system has failed somewhere, and the company is paying extra for a rush order. This adds to the cost significantly, and eats into the profit margin.
But this extra cost can be saved with a control tower, as it allows for real-time management of deliveries. Companies can pinpoint problems and solve them quickly; and in doing so, premium freight deliveries are kept to a minimum and costs are kept down.
4. Better Transparency
Modern multinationals often depend on a large number of outsourced suppliers. This can make things very complicated, and when a problem arises, it can sometimes be difficult to figure out who is responsible.
An attentive logistics manager would usually know if a supplier repeatedly fails to deliver on time. But a control tower offers end-to-end transparency, which means this would be obvious immediately. Businesses can thus manage the performance of their partners with a control tower, ensuring its customers are kept happy.
5. Human Resources Management Plusses
When trusted logistics managers leave a job, they often take institutional knowledge with them. That’s a huge problem. However, when a fourth party logistics provider operates your control tower, it holds most of the information in a data lake. Businesses need worry less whenever a new manager comes on board then; the data is all there for them, and they will not be starting from scratch.
Beyond the issue of cost, there is an added bonus that might make the investment of a control tower well worth it. Since managing a supply chain can be laborious, having a partner to reliably manage your control tower will allow your company can focus on what it does best—your core business.
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