Business Networks vs. Control Towers: Antagonists or Allies?
The nature of business has changed dramatically in the last twenty years. Yet, too many businesses limp along following the trajectory set decades ago; constrained by technological underpinnings of the enterprise technology of the era. In fact, today’s global companies sit upon tens if not hundreds of on-premise enterprise systems which include Enterprise Resource Planning systems (ERP), Manufacturing Resource Planning (MRP), Warehouse Management Systems (WMS) and Transportation Management Systems (TMS), etc. Businesses are also faced with an onslaught of newer technologies such as Artificial Intelligence (AI), Internet of Things (IoT), and Augmented and Virtual Reality (AR, VR) that they must contend with. As organizations look to technology to help them operate the supply chain so they can meet end-user demand, there are two options that are delivering results and garnering accolades: business network platforms and control tower technology.
Analysts too are articulating the value in networks: Gartner released its first Magic Quadrant on Multienterprise Supply Chain Business Networks; IDC released its Multi-Enterprise Supply Chain Commerce Network report; and ChainLink Research its Supply Chain Networks Revealed. At the same time Control Towers have risen to prominence, with analysts and companies alike affirming their effectiveness in managing the supply chain and driving value. In its Control Tower Technology Value Matrix 2018, Nucleus Research calls them an “increasingly vital tool for enterprises to gain visibility over their extended value chains.” So, what are they and which one (if any) do you need?
Supply Chain Control Towers
Control Towers emerged to solve the problem of gaining visibility across different systems. However, most companies still struggle to achieve global visibility across the end-to-end supply chain. According to a recent KPMG report, only 6 percent of companies say they have achieved full visibility over their supply chains. That leaves over 90 percent of companies in the dark about the crucial demand data and supply lines that their business depends on. However, with the data to manage these activities scattered across systems and companies, it makes it extremely difficult to get a timely, global view of the supply chain and to coordinate these activities effectively. Managers must deal with spreadsheets or log in to multiple internal and external systems, to manage things like inventory, orders, shipments, and logistics. Worse, they lack a complete picture of the health of their networks.
That’s where control towers come in. They provide a “mountain top view,” by bringing this disparate siloed information together, giving managers an optimal view of operations and the supply chain.
So, problem solved?
Not quite. The reality is that many control tower solutions don’t achieve the lofty expectations of the customers or the vendors. The reason is simple. They don’t address the root cause of the supply chain visibility problem, rather they merely add another layer of complexity on top to mask the condition.
It also creates latency which we all know is toxic in today’s real-time business world. Old data corrupts derivative data and transactions, and it biases or invalidates the basis of decisions. As supply chain expert Steven J. Bowen says, silos are “the most pervasive and profound barriers to real competitive advantage in every company.” And while many strategies try to address the silo problem, the reality is, “they are only building bridges to span a gap rather than solutioning the real problems with long-term resolutions.”
The irony of control towers is that many exemplify the very problem that they purport to solve. They can’t provide a seamless, real-time integrated view and control point across the supply chain, because they too are an amalgamation of enterprise and supply chain planning and execution systems, patched together with high friction joins and populated with stale, duplicate and contradictory data. They too, shuffle stale rather than real-time data, back and forth between systems. In addition, managing and maintaining these control towers across trading partners and their systems is a mammoth task. This is especially true in today’s volatile economic and global trade environment, when suppliers, distributors and logistics service providers can change significantly and frequently.
The paradigm of specialized, independent, siloed functions is the problem. Networks perhaps hold the key, as they are the polar opposite, prioritizing connectivity and a single version of the truth over disparate and duplicated silos of information and functions.
Multi-Party Business Networks
Network platforms have risen to prominence with social networks like Facebook and LinkedIn. Their business counterparts, multi-party business networks, have proved their worth too. Companies like Airbnb, Uber, and Amazon have clearly demonstrated to their competitors, the deadly effectiveness of connecting buyers, sellers and services in real time. The supply chain, characterized by a distributed network of plants, DCs, service centers, vehicles and goods, is constantly in flux, and is a perfect candidate to be transformed by the network model. Manufacturers, distributors and service centers, must coordinate the creation and movements of huge volumes of product and parts. Much rides on the effectiveness of this, notably service levels, operational costs, and customer loyalty, all of which directly affects the bottom line.
Industry analyst Ann Grackin of ChainLink Research, calls today’s breakthrough business strategy the “networked enterprise.” She says, “In this new paradigm, competitive advantage has as much to do with your network of trading partners and the technology platform your enterprise and ecosystems [rely on], as the actual product or service you offer the market. And we know, for supply chain professionals, solving the multi-party challenge has always been the essence of supply chain.”
Grackin describes the ideal supply chain network as one that has “been organically developed with a single database and single processing engine. This is a many-to-many approach in which all tenants share the same ledger-like, multi-enterprise data store—as well as sharing the same multi-party process execution.”
In essence, all data and processes reside and execute on the same network platform. It provides a single solution where all parties can collectively manage their business processes, such as planning, procurement, order and shipment management, and logistics. Businesses connect once and transact with any other party on the platform, sharing the single source of data on the platform through a permissions-based model.
A true multi-party network model is a radically different to the “patchwork and portal model” that attempts to link system-to-system, or to the spokes to a hub model. The “hub and spoke” approach essentially makes the “spokes” (often suppliers to a customer such as a manufacturer or retailer), subservient to the hub. The hub gets all the data and functionality, while the spokes cannot leverage that same system to manage their other customers or their own suppliers. The benefits of networks are enormous. Only with a network paired with AI, can you fully unlock the value in your supply chain network. The scale of business today has multiplied and with the coupling of the network with AI, masses of data can be harvested, processed and analyzed. It also allows planning and execution to be synched to maximize customer satisfaction. With reduced latency (virtually zero), much of the guesswork and uncertainty is removed from the network, and companies can plan and execute based on real-time, real-world data and conditions, such as actual point-of-sale or consumption data, actual and projected inventory levels, and real-world production capacity. This dramatically lowers inventory levels and
reduces operational costs without compromising service levels. And this is what provides the key to unlocking the full power of control towers.
The New Real-Time Paradigm for a Real-Time World
Control towers do offer companies profound value, in terms of visibility and control. But the domain of that visibility and control depends on the foundation on which it is built. A control tower built on the enterprise-centric model, perhaps with select connections to key systems and partners, offers some visibility to maybe one tier of suppliers or partners. However, a control tower on a multi-party network, provides a 360-degree view of the supply chain across all partners and tiers of the supply network.
The truth is, you need more than a control tower, and you need more than just a network. A network-based control tower eliminates blind spots and reduces risk. With a network-wide domain, visibility, optimization, and execution are more effective as they include all partners and systems, rather than operating within a silo or in a diminished domain of a few interconnected silos. There is reduced risk of missing threats and opportunities that might reside outside the enterprise, or missing the window for action, and only becoming aware of these threats and opportunities when it’s too late to address them.
Network-based control towers unite all functions, integrate planning and execution and enable effective optimization by intelligently coordinating transactions. For instance, the system ties orders to shipments, and track shipments across their lifecycle, while alerting managers when milestones are missed, enabling them to take corrective action or notify the customer of the delay and new ETA. Coupled with control and guided by real-time information, the network- based control tower becomes a potent lever for improving operational effectiveness and efficiency.
The network approach also makes it easier to implement a control tower. Companies joining a mature network often discover to their delight, that many of their suppliers and carriers are already on the network, so there’s no need to onboard them. Thus, it’s easier and quicker to get started and companies start seeing results almost immediately.
In the end, the answer is “Allies”. Control towers running on multi-party networks offer a double dose of innovation and multiplied value that is scarce in today’s hyper competitive world.
About the Author:
Nigel Duckworth is a senior strategist at One Network Enterprises, provider of an AI-enabled business network platform that enables all trading partners to manage, optimize and automate complex business processes in real time. To learn more, visit www.onenetwork.com or follow ONE at https://twitter.com/onenetwork.