IDC TECHNOLOGY SPOTLIGHT Sponsored by: IBM

Supply Chain Orchestration with a Modern Control Tower August 2020

Written by: Simon Ellis, Program Vice President

Introduction The supply chain is undergoing a significant amount of disruptive change. Although COVID-19 has made 2020 a bumpy ride, it is just the latest and most significant example of the kinds of disruptions the supply chain can expect into the future.

In the past, disruptions have tended to be regional. While the initial reactions to these disturbances have been replete with professed urgency to change existing practices, all too often that sentiment passes with time and resumption of normalcy. COVID-19 is the first fully global disruption in decades, and it does feel different than past crises. Although those of us who have both studied and operated supply chains for decades have always talked about the importance of visibility, agility, flexibility, and resiliency, those four terms are now on the tip of everybody's tongue and are taking on a profoundly more important role.

It is easy to see now that resiliency is critical; however, in the past, companies found it difficult to detail the business case fully and financially for resiliency and justify its return on investment — and to build the necessary internal capabilities. In some ways, COVID-19 has revealed the "cracks" in the supply chain and presented companies with a once-in-a-lifetime opportunity to transform their supply chain and be truly resilient.

What Does the Data Say? IDC's 2020 Supply Chain Survey, which was conducted amid the developing coronavirus crisis/pandemic, asked participants about the supply chain gaps that would be most problematic to the broader business if not properly closed (see Figure 1). The results shine a light on not only what is happening in the supply chain right now but also what is likely to define the "next" normal … and the normal after that.

Supply chain control towers have had a somewhat slow gestation in many supply chain organizations, but they become critical to provide the speed and agility necessary for true supply chain resiliency in the face of disruptions.

KEY STATS 85% of respondents to IDC's 2020 Supply Chain Survey said that the supply chain control tower is either important or very important to the future of the supply chain.

WHAT'S IMPORTANT Visibility and agility lead to resiliency and the ability to pivot when and as necessary.

KEY TAKEAWAYS The ability to see, decide, and then act differentiates leading supply chains from laggards.

AT A GLANCE

Page 2 #US46772320

IDC TECHNOLOGY SPOTLIGHT Supply Chain Orchestration with a Modern Control Tower

FIGURE 1: Critical Gaps in the Supply Chain Q What are the most important gaps that, if not addressed, will materially affect your supply

chain?

n = 816

Source: IDC's Supply Chain Survey, 2020

The reality for the post-COVID-19 supply chain is that it must be agile and resilient and able to pivot to new business models where necessary. In IDC's 2020 Supply Chain Survey, over half of respondent companies said that they had experienced some business desertion or expected to experience it this year. Disruption was already accelerating; the fallout from the pandemic will simply speed it further.

There is little question that technology will play a critical role in enabling supply chain resiliency and the ability to pivot the supply chain as market forces dictate. One of the key areas for the application of technology is in supply chain orchestration and the control tower capabilities that underpin orchestration. Supply chain control towers have had a somewhat slow gestation in many supply chain organizations, but they are critical to provide the speed and agility necessary for true supply chain resiliency.

The Modern Control Tower The term "control tower" has been used in discussion of the supply chain for some years now as there has been an evolving realization that the supply chain must be orchestrated more broadly than just the movement of materials and finished goods. A modern control tower must act as a hub to encompass the full breadth of the supply chain beyond just logistics and fulfillment. It must include sourcing/suppliers, demand (sensing), and inventory. At its most basic, the modern control tower must be able to understand what has happened, what is happening, and what will happen (see Figure 2).

0 5 10 15 20 25

Inadequate pipeline of new products

Insight into our customers andconsumers

Collaboration with external suppliersand/or customers

Digital competencies to transition thesupply chain to new business models

Supply chain resiliency

(% of respondents)

Page 3 #US46772320

IDC TECHNOLOGY SPOTLIGHT Supply Chain Orchestration with a Modern Control Tower

FIGURE 2: Modern Control Tower for 2020 and Beyond

Source: IDC, 2020

There are many views about the role that a control tower plays. Some view it essentially as a mechanism for supply chain visibility, others see it as an analytics engine, and still others see it as a decision-making entity. At IDC, we would argue that it should be viewed as all three. Indeed, the modern control tower must see what's happening in the supply chain (and probably the broader business and outside world as well), analyze what it observes in real or near real time, determine what needs to be done, and then facilitate action. It is also important to recognize that the modern control tower is an enabler of both efficiency and responsiveness. Within the current disruptive supply chain operating environment, the importance of responsiveness is clear, but it is equally important that a modern control tower drive efficiency in the supply chain and be the hub through which companies orchestrate day-to-day operations.

As illustrated in Figure 2, the modern control tower sits atop the supply chain and the multienterprise networks that enable linkages and collaboration with key suppliers and customers. At IDC, we also think that the control tower will be the orchestration engine that brings together the physical supply chain and the digital supply chain. Often referred to as the supply chain digital twin, integration with the control tower is not currently available, but it will be an important evolution for the control tower.

Today, the supply chain control tower consists of the following elements:

» See. Visibility is a critical enabler for the control tower and the modern supply chain. In this age of transparency, it is simply not acceptable to "now know" and fail to take the required action. Companies must have both depth and breadth to their visibility. For example, having capability of demand sensing coupled with real-time and granular inventory visibility by location and SKU can enable proactive and accurate mitigating actions.

Supply Chain Orchestration (Modern Control Tower)

Digital Supply ChainPhysical Supply Chain

Data

Multienterprise Supply Chain Network

What HAS Happened

What IS Happening

What WILL Happen

Page 4 #US46772320

IDC TECHNOLOGY SPOTLIGHT Supply Chain Orchestration with a Modern Control Tower

» Decide. Modern analytics capabilities that are embedded in applications and that exist as a separate platform are the foundation on which the modern control tower functions. Analytics capabilities must be both reactive and predictive. Monitoring internal activity and correlating it with external events is critical. Assuming that data quality is acceptable (which is increasingly true), the ability to leverage analytics across the ever-growing volumes of data remains a real challenge for many manufacturers. Their analytics capabilities often lag data growth, and the problem is only likely to get worse without remediation.

» Act. Perhaps the trickiest of the three elements of the supply chain control tower is the notion of "act" and the role that the modern control tower plays. Is it a facility that sends instructions to operational systems that then implement those instructions? Or does the control tower handle operational decisions directly? It is IDC's view that a modern control tower primarily plays an executional role in the supply chain, taking broad direction from the strategic plan (and perhaps "translating" higher-level business strategy into supply chain strategy) and developing the tactical playbook and operational actions.

Although there is a tendency to think of the modern control tower as a single, monolithic entity, the reality is that it is an aggregation of many different control towers, each doing something specific within the supply chain. This scenario does not mean that supply chains must invest in a whole series of control towers. Instead, the modern control tower will have different "flavors" that can be configured as necessary. For example, there will be a logistics control tower facility that ingests the appropriate data to facilitate next best actions related to logistics tasks. There will also be an inventory control tower. This capability is particularly relevant when companies struggle to understand what inventory they have, where it is, and how quickly it can be deployed. An inventory control tower would be tasked with visibility into inventory across the supply network, analyzing the implications of those positions and either recommending or taking the correct action. The reality is that the modern control tower must be able to solve real-world business problems that prior orchestration approaches could not.

It is important to note the transformative role of digital technologies on the progression of control towers. Digital transformation in the supply chain can seem like an abstraction until an organization digs down into relevant supply chain challenges and sees how significantly technology moves supporting use cases from aspirational to practical. There are myriad examples of this shift within the supply chain. However, the fact that the control tower has historically failed to find traction with many organizations speaks to the technological limitations of past tools. These limitations might be the lack of quality data, the insufficiency of the analytics engine, or the lack of actions in real time. In IDC's 2020 Supply Chain Survey, respondents identified the use of new technology as the top driver of change and progress in the supply chain.

At the end of the day, the modern control tower exists in service of practitioner efficiency and issue resolution. Examples of how it achieves this aim include:

» Enabling collaboration between the people both within and external to the supply chain by quickly providing insight or linkages that might be unrecognized or of material opportunity. The ability to leverage cross-silo, cross-function, and cross-organization visibility and collaboration contributes to a more resilient business by enabling effective workflow.

» Recommended actions allowing either the communication of issues/events or automated actions based on those issues/events across the supply chain — particularly where people coverage may be less complete.

Page 5 #US46772320

IDC TECHNOLOGY SPOTLIGHT Supply Chain Orchestration with a Modern Control Tower

» Keeping an eye on supply chain playbooks, particularly as they relate to things such as customer prioritization, inventory policies, and service-level trade-offs.

A modern control tower also provides easily consumable outputs such as targeted/persona-based reporting, operational dashboards, and detailed scenario-specific playbooks designed to drive intelligent decision making.

Benefits of the Modern Control Tower According to IDC's 2020 Supply Chain Survey, most organizations — 85% — view the modern control tower as either important or very important to the future of their supply chain. But why is the control tower important, and what are the benefits that accrue from taking supply chain orchestration to the next level? IDC has argued that supply chain resiliency is critical in 2020 and beyond and that a control tower is critical for resiliency and the ability of the supply chain to pivot when necessary. In the IDC survey, 55% of respondents said that they expect some form of business model disruption within the next 12 months and 63% said that the most problematic gap within their current supply chain is the inability to be resilient to marketplace changes.

The modern control tower is not just about resiliency, though; it is also about short-term performance. In IDC's 2020 Supply Chain Survey, 60% of companies identified efficiency and effectiveness in the short term as the main drivers of digital supply chain transformation. The ability to optimize the operational aspects of the supply chain on a daily or even an hourly basis is essential. A supply chain that cannot perform in the short term may not survive to compete in the longer term. In part, the modern control tower knits disparate systems together, but it also connects those systems to the right data at the right time and in the right place.

Resiliency and operational efficiency and effectiveness do not just happen in a vacuum: They must be architected. Resiliency must be about the ability to quickly see emerging risks and adapt to changing business conditions while maintaining the core purpose and principles of the business, but it is also about reactive speed and how agile the supply chain is in responding to a situation. In order for the supply chain to be resilient, it must be able to see, decide, and act. Without a modern control tower to knit the often disparate elements of the supply chain into a cohesive whole, companies will struggle to have resilient supply chains.

In addition to linking disparate and often poorly integrated supply chain systems, the modern control tower enables intelligent decision making, in terms of the optimal reaction to change and allowing that reaction in real time. Further, the modern control tower should support and augment the people working within the supply chain. The control tower may be authorized to take actions independently of human intervention but only as a way to automate predefined rote tasks.

Considering IBM The IBM Sterling Inventory Control Tower uses artificial intelligence (AI) to provide the insights that organizations need to see their inventory wherever it is, identify external events and understand how they may impact inventory so that any consequential disruptions can be predicted sooner, and take actions based on recommendations to mitigate the effects of those disruptions. The solution is designed to allow companies to respond faster to market changes and deliver better customer experiences while helping reduce costs.

Page 6 #US46772320

IDC TECHNOLOGY SPOTLIGHT Supply Chain Orchestration with a Modern Control Tower

The Sterling Inventory Control Tower correlates data across silos and disparate systems to provide a single end-to-end view of the supply chain and inventory — from raw material availability and supplier orders to the last mile of customer delivery. It includes out-of-the-box connectors for various data sources and provides smart alerts to help organizations quickly detect internal and external events that could impact inventory.

Virtual Resolution Rooms make collaboration easy between the right team members across organizations and partners, and embedded AI enables natural language conversations, providing immediate access to information and recommendations to take corrective action. Digital Playbooks provide guidance on best practices and preserve organizational knowledge to speed issue resolution over time.

Sterling Inventory Control Towers has embedded AI that extends beyond analytics and chatbot capabilities. The solution's AI capability is trained in supply chain ontologies and includes natural language processing, machine reasoning, intelligent agent orchestration, and Digital Playbooks.

The solution can be utilized as part of the IBM Sterling Supply Chain Suite, which includes applications for supplier, order, and inventory management. The suite is an open, integrated platform with customizable components that easily connects to a company's ERP and supplier ecosystem.

Challenges

Although IBM is well-positioned to succeed in the control tower space, it is one of a number of competent competitors with a wide variety of capabilities. In a way, the breadth of capabilities has resulted in many different definitions and forms of control towers. It will be important for IBM to clearly define its view of the modern control tower and the key linkages to supply chain orchestration.

Conclusion/Essential Guidance Modern control towers are a critical component of the supply chain orchestration capabilities that will define true resiliency. Without a centralized way of organizing and integrating information from disparate parts of the organization, and then making informed, integrated, and timely decisions, supply chains will not perform at their best. They will not be responsive, and they will not be efficient. If COVID-19 has taught the supply chain anything, it is that resilience will be critical moving forward.

We have noted in this paper that the modern control tower can exist in various forms and functions. While integrating elements such as the supply chain digital twin may still be aspirational, looking at inventory throughout the supply chain in a holistic way is not. Indeed, the inventory control tower is the practical step to take, and it can be implemented today.

As companies navigate the COVID-19 pandemic, the top critical gap for the supply chain is the lack of supply chain visibility and resilience to see necessary changes in time to react to them effectively. A modern control tower that enables true real-time supply chain orchestration will be a critical capability for the best-in-class supply chain. It is not hyperbole to suggest that without a modern control tower available to orchestrate the supply chain, organizations will have more difficulty overcoming visibility challenges, analytics shortcomings, or disconnects between what they see and how/when they act. The modern control tower is available now to help organizations with their supply chain. Organizations should do themselves a "favor" and check out the technology. They may well be surprised by how far it has come.

The inventory control tower is the practical step to take, and it can be implemented today.

Page 7 #US46772320

IDC TECHNOLOGY SPOTLIGHT Supply Chain Orchestration with a Modern Control Tower

About the Analyst

Simon Ellis, Program Vice President As a program vice president, Simon Ellis is responsible for providing research, analysis, and guidance on key business and IT issues for manufacturers. He currently leads the Supply Chain Strategies practices at IDC Manufacturing Insights, one of IDC's industry research companies that address the current market gap by providing fact-based research and analysis on best practices and the use of information technology to assist clients in improving their capabilities in critical process areas.

MESSAGE FROM THE SPONSOR

About IBM Sterling

A smarter business starts with a smarter supply chain. Built to be resilient, smarter supply chains adapt when facing disruptions. They can scale to meet new demand as customer needs change. They are more reliable and designed to build trust between you and your customers. Whether it’s new innovations, new opportunities or an evolving ecosystem, IBM’s approach to supply chain management can help you respond today and prepare for the future to deliver better business outcomes. IBM helps you strengthen resiliency, optimize operations and reduce inefficient, error-prone processes with intelligent workflows that integrate securely with your existing systems. Together, we can automate decision-making where it makes sense and empower your people with real-time insights to respond faster to an ever-changing world.

Learn how to act with speed and confidence to mitigate disruptions and build resilient supply chain solutions: https://www.ibm.com/supply-chain.

The content in this paper was adapted from existing IDC research published on www.idc.com.

IDC Research, Inc.

5 Speen Street Framingham, MA 01701, USA

T 508.872.8200

F 508.935.4015

Twitter @IDC

idc-insights-community.com

www.idc.com

This publication was produced by IDC Custom Solutions. The opinion, analysis, and research results presented herein are drawn from more detailed research and analysis independently conducted and published by IDC, unless specific vendor sponsorship is noted. IDC Custom Solutions makes IDC content available in a wide range of formats for distribution by various companies. A license to distribute IDC content does not imply endorsement of or opinion about the licensee.

External Publication of IDC Information and Data — Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason.

Copyright 2020 IDC. Reproduction without written permission is completely forbidden.