Supply Chain Visibility

in Consumer Markets
Control Tower Advantage

March 2013
Bob Heaney
 March 2013
Supply Chain Visibility in Consumer
Markets: Control Tower Advantage Analyst Insight
Aberdeen’s Insights provide the
In Aberdeen’s recent Supply Chain Visibility survey (Supply Chain Visibility analyst's perspective on the
Excellence: Mastering Complexity and Landed Costs, March 2012), 127 survey research as drawn from an
respondents indicated the rising complexity and globalization of operations aggregated view of research
(45%) as their top business pressure (Figure 1). Further, the second highest surveys, interviews, and
pressure among all respondents was the need to improve supply chain data analysis.
operational speed and accuracy (40%). These pressures are compounded in
the fast-moving consumer markets where the emergence of new sales Definitions
channels like online, mobile, and call center have further complicated the
supply chain. Aberdeen defines omni-
channel logistics as the art of
The research indicates that omni- and cross-channel logistics processes producing, selling, and fulfilling
(defined in sidebar) are increasing in complexity and importance. Reacting to customer needs for products
this complexity, consumer market companies have reinforced attempts to or services in more than one
strengthen visibility and collaborative execution across their extended sales channel such as stores,
online, call center, catalog,
supply chains. Aberdeen’s Chief Supply Chain Officer survey of 191
wholesale, and mobile. We
enterprises (updated November 2012) denotes that leading consumer define multi-channel
markets are 3.2-times more likely than all other companies to focus on logistics as a combination of
cross-channel logistics (in-bound and out-bound) needs by coordinating two or more of these channels.
product flow across all channels.
Cross-channel logistics is
This Analyst Insight highlights the 39 companies (from the 127 overall) defined as the art of producing,
within the consumer market sector. These companies address the need for selling, and fulfilling customer
effective logistics through timely response to demand regardless of the needs for a product or service
logistics channel dictated by the customer's specific request. The goal for in more than one sales or
leading retailers and suppliers is to work cohesively to ensure that products logistics channel. Cross-channel
logistics is facilitated in the
reach the right place at the right time to produce a seamless experience.
control tower approach
This must happen with visible, integrated operations and elevated levels of defined as a set of integrated
collaboration across all channels. In short, today's supply chain management processes and technologies that
professional is tasked with moving products further and faster than ever support a seamless flow of
before through various channels while striving to decrease logistics costs product from source to end
and increase profitability. consumer, regardless of each of
the various purchase, return,
and exchange preferences.
Business Pressures — Need for Speed
As mentioned above, the pressures of increased complexity and heightened Consumer Markets
comprise retail, food and
demand for speed have supply chain professionals looking for answers. A
beverage, consumer packaged
deeper look reveals supply chain velocity, whether operational speed or goods, and consumer
timeliness of shipment information, is the top (combined) pressure. Velocity
electronics verticals.
is a critical matter for the fast-moving supply chains within consumer
markets. Case in point, the items sold by many of these companies have a
short shelf life either due to high usage (i.e. toiletries or cleaning products)
or perishability (i.e. dairy, meat, or vegetables). For example, "The total shelf
This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and
represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc.
and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.
Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 2

life of fluid milk is about 14 days. In fact, the milk that is on the shelf today
was in a cow about two to three days ago," said Lee Falk, Vice President,
Distribution & Logistics, Dean Foods, at the 2012 Aberdeen Supply Chain
Summit.

Figure 1: Top Business Pressures

"A more responsive retail

Growing global operations / complexity 45% supply chain is required to
improve customer service
levels — it is the foundation to
Need to improve supply chain fulfilling the mandate of 'right
40%
operational speed and / or accuracy product at the right place at
Increased demand for accuracy and the right time.'"
timeliness of shipment event 27% ~ Stephanie Ranada, Manager of
information Supply Chain and Logistics,
The business mandate to reduce supply Tropical Retail Company
21%
chain execution costs

0% 10% 20% 30% 40% 50%

Percent of Respodents n=127
Source: Aberdeen Group, March 2013

The need for speed is obvious, but the actual pressure around increased
supply chain speed is the need to increase the accuracy of demand
forecasting and inventory. Since consumer markets depend on volume to
turn a profit, shelf availability is paramount. Without accurate demand
sensing and/or an accurate view of total inventory (amount by channel and
location), it is almost impossible to integrate logistics to put the right
product in the right place at the right time.

Strategic Actions — Internal and External Visibility and

Collaboration
The above pressures push consumer-market companies toward strategies
to increase internal communication and bolster supplier integration.
According to Figure 2, 72% of consumer market survey respondents listed
improving internal cross-departmental visibility and integration as their top
strategic action compared to only 58% of All Others. Internal
communication is often overlooked as a means of improving supply chain
performance.
In a recent interview with on this topic, Angel L. Mendez, Senior Vice
President of Cisco Transformation at Cisco Systems pointed out that, in
many ways, supply chain problems often result from poor communication.
According to a recent article on the Cisco website, Building a Collaboration
Architecture for a Global Supply Chain, “The problems that companies with
large global supply chains face today are human problems — delays and
inefficiencies around person-to-person communications."
© 2013 Aberdeen Group. Telephone: 617 854 5200
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Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 3

With the focus consumer market companies must have on supply chain
velocity (as mentioned above), it is little wonder that consumer market
companies are 35% more likely to have improving internal visibility and
integration as their top business strategy.

Figure 2: Top Business Strategy

Improve internal cross-
departmental visibility and
integration
Streamline processes for
easier monitoring, enhanced
usability, or efficiency
Increase B2B connectivity /
visibility into supplier-side
processes
0% 15% 30% 45% 60% 75%
Percent of Repsondents n=127
"Currently, our biggest
challenge is integration with
72% our suppliers and trading
partners. We are using a
58%
legacy purchasing and order
management system which is
labor-intensive and non-
56% collaborative from an
execution standpoint. We
48% must improve our data
integration, order visibility,
inventory flow, and route
execution."
38%
Consumer Markets ~ Director, Supply Chain
26% No Consumer Markets Distribution, BC Liquors ($2.1
Billion Beverage Retailer in
Canada)
Source: Aberdeen Group, March 2013

Similar to the initiative to improve internal visibility and integration,

consumer markets also focus on external supply chain factors affecting
visibility and collaborative execution. Figure 2 indicates consumer market
companies are 46% more likely than non-consumer market companies to
list increasing B2B connectivity and/or visibility as one of their top
strategies. Again, we see an effort among consumer market companies to
increase their supply chain speed and efficiency by increasing internal and
external (supplier-side) collaboration and integration. In fact, in a recent
Aberdeen report, B2B Collaboration: No Longer Optional, the top actions
taken to improve B2B integration and collaboration were:
• Process integration with partners — 52% of consumer market
companies listed integration of partner-facing collaboration
processes with internal business processes compared to just 36% of
non-consumer market companies.
• Inventory reduction — 50% of consumer market companies
listed reducing inventories through better visibility of inbound
deliveries and upstream inventories compared to just 23% of non-
consumer market companies.
In the next section, we will discuss how consumer market companies differ
from their counterparts in terms of capabilities with a particular focus on
omni-channel effectiveness and cross-channel logistics.
© 2013 Aberdeen Group. Telephone: 617 854 5200
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Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 4

Omni-Channel Requirements and Control Tower

Capabilities
Cross-channel retailing involves a combination of brick-and-mortar
locations, web, catalog, and mobile and vendor-direct drop-ship programs. It
requires integrated visibility, as customers no longer accept the website of a
retailer or consumer packaged goods supplier / distributor to be different
from brick and mortar store operations when it comes to product
availability and the delivery process. Comparing the consumer market
companies to All Others reveals that consumer markets companies are
more advanced in integrating inbound-to-outbound shipments, visibility, and
multi-tier product fulfillment across logistics channels. Within consumer
markets we find:
• 82% — Importing (receiving from other countries) — 1.28-times
• 79% — Shipping to or through a traditional distribution center (DC)
— 1.55-times
• 63% — Shipping direct-to-consumer or direct-to-store
• 61% — Shipping via a break-bulk facility (i.e. cross dock, transload,
direct DC bypass) — 2.26-times
• 48% — Shipping through 3PL or e-fulfillment provider — 1.02-times
• 24% — Shipping through a free port, free port zone, or transition
point for customs
Omni-channel logistics is today's new normal as new logistic formats and
cross-channel integrations grow for companies in the consumer market
segments and across the board. From the list above we see globalization
(82% dealing with imported product) and alternative logistics flows (63% by
passing the DC with direct to consumer or direct to store) are 1.2 to 2.3 –
times as likely to be adopted within the consumer market. With 82% of
products coming from overseas it is not surprising that bypassing the DC by
shipping to the market through a break-bulk facility (cited by 61%), has
grown substantially. This means companies in the consumer market are
2.26-times as likely as All Others (where only 24% use break-bulk facilities)
to utilize this alternative logistic channel.
The high levels of adoption illustrate that omni-channel logistics has arrived
and is a required foundational capability for an effective and competitive
supply chain. One key concept evolving in both process and technology is
the Collaborative Control Tower. This strategy ensures all players are
involved in a collaborative, unified manner to make certain that products
reach the right place at the right time, whether it is the retailer's store, a
flow-through DC, a direct-to-consumer online DC, or a traditional DC.
Table 1 examines several areas where the consumer market has adopted
advanced capabilities to address omni-channel logistics challenges.

© 2013 Aberdeen Group. Telephone: 617 854 5200

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Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 5

Table 1: Capabilities and Advantages for Consumer Markets

Consumer Non
Data Summary Markets Consumer
Markets
Online visibility into inbound in- 65% 59%
transit shipment status
Online visibility into outbound in- 66% 64%
transit shipment status
The ability to find (within a 56% 52%
reasonable time) and access
INBOUND supply chain data needed
for decision making
The ability to find (within a 59% 57%
reasonable time) and access
OUTBOUND supply chain data
needed for decision making
Centralized supply chain 84% 67%
management organization
Cross-functional supply chain 71% 62%
metrics
Online trading partner collaboration 55% 44%
and enablement

Source: Aberdeen Group, March 2013

Cross-channel logistics requires visibility. But visibility must be acted upon

near-real time to impact in-flight shipments. The number of parties and
status events is extensive and includes inbound and outbound shipment
events which span 1) product sourcing from overseas, 2) traditional DC and
nontraditional logistic formats, and 3) the eventual delivery to the end
consumer. For the consumer markets anywhere from 65% of companies
have this visibility today whereas for non-consumer markets the number is
as low as 59% (Table 1). To address increased visibility with enhanced
collaborative technology is the focus of the Collaborative Control Tower.
This capability can drive significant advantages when it comes to inventory
allocations and reallocations to support formats such as DC bypass from
inbound to outbound. Beyond visibility there is the capability to respond to
the visibility you have within a reasonable timeframe. Here again consumer-
market companies lead the way — where up to 59% can claim near real-
time decision-making capability.
The last three items in Table 1 demonstrate some of the organizational and
collaborative execution capabilities companies in the consumer market
segment possess. For instance they are 1.25-times as likely as All Others to
centralize the supply chain management organization (84% vs. 67%). They
also do a better job at providing trading partner enablement and
collaboration and integrating cross-functional supply chain metrics (where
they are 1.14 to 1.25-times as likely as All Others to have these capabilities).
© 2013 Aberdeen Group. Telephone: 617 854 5200
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Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 6

Without visibility, responsive decision-making, and collaborative execution

(the three key processes of a control tower) it is not possible to execute
cross-channel logistics effectively in today's global supply chain. In the next
section we will look to some of the technological advantages that further
separate performance in the omni-channel supply chain.

Technological Enablers in Omni-Channel Supply Chains

Today's multi-channel, multi-party supply chain requires frequent access to
inbound and outbound supply chain data, granular levels of visibility,
increased decision-making support, and collaborative technology to
integrate product and information flows. This is facilitated by the following
control tower technology and automation features.

Figure 3: Control Tower Execution Adoption — Consumer

Markets
“Our business spikes are
enormous specifically during
Visibility into warehouse management 65% the heavy tire selling season in
system (WMS) - 1.05x 62% the winter months. The spike
could be from 20,000 units to
Event tracking (i.e., tracking and escalation 62% 60,000 units in a matter of
capabilities) - 1.17x 53% days. The main challenge for us
is to mobilize and leverage our
Visibility system with dynamic collaborative 58% distribution center capacity and
electronic messaging - 1.16x 50% handling capabilities to
maximize timely deliveries. The
Logistics / channel inventory collaboration 55% main issue is to balance demand
with customers (outbound) - 1.10x 50% and supply with the costs
involved — from the suppliers
Event management (i.e., tracking and 50% to the DCs and then ensure
escalation capabilities) 56% deliveries to the stores as tires
and parts are not easy
Big Data BI tools for critical aspects of SC 48%
Consumer
commodities to handle.”
analysis - 1.04x 46%
All Others
~Rick O’Connor, Director,
Technology to transmit / pre-label, tender 43% Supply Chain, VIP Parts and
and scan cartons for DC-bypass - 1.30x 33% Tires

0% 20% 40% 60% 80%

Percent of Respondents, n = 127

Source: Aberdeen Group, March 2013

As the adoption levels of new logistics formats and cross channel capabilities
have advanced so have the collaborative technology solutions that
companies have deployed under a control tower platform. For these
solutions as well, the consumer market lead the way in adoption (Figure 3).
For instance, when we examine the capabilities of granular visibility into
warehouse operations (65% of consumer markets), escalating and tracking
capabilities across inbound or outbound flows (50% to 62% range), and pre-
labeling of cartons for DC bypass (43%), we find that companies in the
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Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 7

consumer markets are more likely to automate. Figure 3 illustrates that

companies in consumer markets are anywhere from 1.04- to 1.3-times as
likely to have each specific collaborative technology in place compared to
their peers.
Leading companies take a global control tower approach based on
collaborative technology that facilitates visibility and control across the full
supply demand network. The goal is to ensure all players are involved in a
unified manner to make certain that products reach the right place at the
right time, whether it is the retailer's store, or flow-through DC, a direct-
to-consumer online DC, or a traditional DC. The retail sector traditionally
has lagged in terms of supply chain execution; however some new trends
dramatically change this situation, namely:
• Emergence of direct import models from global destinations (up to
82% in this study)
• Rising transportation costs resulting in a pressure towards margins
for retailers
• Rise in customers demanding improved customer service and new
sales and logistics delivery models
• Dramatically reduced product life cycles due to rise in global
competition
It should be noted that many of the new logistics formats, such as a direct-
to-consumer online DC, require significant re-engineering of the traditional
DC from a volume and material handling standpoint. In the next section we
will examine the technological transformation of UPS to bring cloud-based
visibility and control tower capability to the extended supply chain.

Case in Point — UPS Rolls out Cloud-Based Technology

Closes the Loop on Inbound-to-Outbound Visibility
In December 2012, UPS announced their new enterprise customer visibility
solution. This new solution moves process and decisions support
functionality from behind the company firewall to a cloud-based, multi-
enterprise technology platform (UPS Introduces New Cloud-Based Visibility
Platform).
UPS has included track and trace, and event status of inbound orders and
shipments in its internal legacy systems for more than 20 years. They are
well known for opening up real-time access (with their investments in the
1980s and since) for their online web-based outbound delivery scanning /
tracking / confirmations network called UPSnet.
"UPSnet uses more than 500,000 miles of communications lines and a
dedicated satellite to link more than 1,300 UPS distribution sites in more
than 200 countries,” said Tom Boike, Vice President of Supplier
Management. “If you have received a UPS tracking update, you know how
outbound tracking works. You can think of our new solution, Order Watch,
as a cloud-based extension of this capability to our customers, brokers,
© 2013 Aberdeen Group. Telephone: 617 854 5200
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Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 8

suppliers, and carrier partners for each customer's inbound rather than
outbound network."
The new order management solution moves inbound order tracking and
visibility to a collaborative third-party technology platform and decision
support system. This highly configurable, multi-enterprise platform allows
secured, cloud-based interconnectivity across each customer's supply-
demand network, enabling in-depth visibility to the multi-enterprise
extended supply chain. “Through scalable cloud-based
"In the past, event tracking for inbound orders and shipments was largely supply chain management
limited to internal UPS staff on our in-house legacy systems,” Boike said. technologies such as UPS
Order Watch, our new cloud-
“Now customers, suppliers, third-party carriers, and partners can just plug
based solution powered by GT
into the new cloud-based platform behind its multi-enterprise firewall. Each Nexus, companies are not only
person in the extended supply chain can now go online to input status able to streamline management
changes, monitor exceptions, and transact business, according to their of vendors, but also manage all
permissions and workflow. This allows customers to more efficiently of their inbound shipments via
collaborate with global suppliers and partners and better manage their a single platform. This can
inbound supply chains. By going to a multi-party online platform for inbound, provide opportunities to
we can now complete the loop and offer full traceability from inbound consolidate ocean freight
origin to outbound final delivery for both customers and partners," Boike shipments and improve
went on to say. container usage to realize cost
savings. This is increasingly
important as COOs are looking
Benefits of a Cloud-Based Solution for ways to mitigate ocean
The benefits to customers of closing the loop on inbound-to-outbound transportation costs following
the ocean carrier rate increases
visibility include:
in 2013."
1. Increased customer/supplier control — Enhanced monitoring ~ Tom Boike, Vice President of
of vendor bookings against purchase order (PO) details increases Supplier Management, UPS
inventory control, enabling intervention in early or late shipments
or improper order quantities.
2. Facilitates single version of the truth — Connecting the entire
supply chain community from ocean carriers to suppliers provides a
direct online linkage to the host cloud network, reducing latency,
inaccuracy and redundancy.
3. Move from EDI batching to online — This eliminates the need
for electronic data interchange (EDI) file exchanges between each
customer and supplier or carrier pair. Ocean carriers and suppliers
already on the host cloud platform have immediate interconnectivity
and access to UPS POs and shipments as soon as they enter the
Order Watch system.
4. Enables Collaborative Execution — System-generated
exception alerts, dashboards, and drilldowns help ensure vendor
adherence to customer requirements and provide an online system
for approvals and facilitating PO and shipment-specific
communication between vendor or carrier and customer.
5. Enables DC Bypass and speed to channel — By closing the
loop on inbound-to-outbound visibility the company can enhance its
© 2013 Aberdeen Group. Telephone: 617 854 5200
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Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 9

ability to rationalize and truly optimize the supply-demand network.

A distribution center bypass location is now often up to 8,000 miles
away. Any consumer- or customer-specific shipment that could be
done in the U.S. or home country could move all the way upstream
to the origin point and now closed-loop track and trace from
inbound-to-outbound is integrated.
"Companies are beginning to look to the cloud for opportunities to improve
supply chain collaboration and reduce operational inefficiencies,” Boike
added. “Through scalable cloud-based supply chain management
technologies such as UPS Order Watch, our new solution, companies are
not only able to streamline management of vendors, but also manage all of
their inbound shipments via a single platform. This can provide
opportunities to consolidate ocean freight shipments and improve container
usage to realize cost savings. This is increasingly important as COOs are
looking for ways to mitigate ocean transportation costs following the ocean
carrier rate increases in 2013."

Recommended Strategic Actions and Steps

Survey results and case study interviews show that the firms enjoying Best- "Multi-channel provides a
in-Class supply chain performance differentiate themselves by: branded customer experience
anytime anyplace anywhere. A
• Supporting a strategic complement of new logistics formats and brand can differentiate
Collaborative Control Tower processes designed to synchronize themselves and their services
planning and dynamic execution across the extended multi-party across multiple channels that
supply chain. can apply to any customer
segment."
• Developing a centralized control tower platform for global multi-
enterprise visibility and control with cloud-based connectivity. ~IT Manager, Tier 1 Retailer,
Europe
• Transforming the internal to external partner reporting structures
and roles to align with omni- and cross-channel process integration
and coordination requirements under the control tower approach.
• Complementing control tower collaboration with performance
dashboards and supporting agreements to elevate financial and
operational performance management for suppliers, trading,
partners, 3PLs, and others.
• Developing a daily track and monitor supply chain execution
correction capability to support speed-to-market with adaptive
logistics channel optimization tools for effective product flow and
supply chain responsiveness.
• Balancing integration of upstream and downstream supply chain
logistics planning and execution processes to meet the global omni-
channel market demands while delivering improved supply chain
agility.
For more information on this or other research topics, please visit
www.aberdeen.com.

© 2013 Aberdeen Group. Telephone: 617 854 5200

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Supply Chain Visibility in Consumer Markets: Control Tower Advantage
Page 10

Related Research
B2B Collaboration: No Longer Optional, Global Trade and Supply Chain
May 2012 Management: The Global Imperative;
Transportation Procure to Pay: Spend November 2011
Management Trends under 2011 Transportation Contract, Tender
Globalization; April 2012 and Spend Management; April 2011
Supply Chain Visibility Excellence: Supply Chain Visibility: Fostering Security,
Mastering Complexity and Landed Costs; Resiliency, and Efficiency; February 2011
March 2012 International Transportation: Optimize
Intermodal Optimization- Enhancing Last Cost and Service in a Global Market; July
Mile Visibility and Execution; February 2010
2012
Fulfillment Excellence and Dynamic
Event Warehousing Come of Age;
January 2012
Authors: Bob Heaney, Senior Analyst, Supply Chain Execution
(bob.heaney@aberdeen.com)

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This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies
provide for objective fact-based research and represent the best analysis available at the time of publication. Unless
otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be
reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by
Aberdeen Group, Inc. (2013a)

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