Doctrine of Control

The trade press presents a steady stream of articles about how leading companies manage their supply chains. At times, I get the impression that the editors and writers think that whatever new trend a company is “blazing” is a new concept.

Please. New? I doubt that any of these concepts are new. They may be new to the company, but I doubt that, too. Most likely, the concept is something the editors or writers had not heard about before.

The idea of a Control Tower in supply-chain management is one example of an old idea the trade press is touting as something new. The Control Tower concept assumes that a team in the central operations center monitors all the activities of a far-flung supply chain, making decisions and changing plans according to changing circumstances. Technology and the speed of communications now allow decision-making to be centralized, enabling a single team to control all aspects of the process.

That sounds like what Aaron Montgomery Ward did with the operations of his mail-order catalogue operations. Ward’s operations followed the Doctrine of Control. In 1915, Ward’s supported one of the first private long-distance telegraphs, and then the long-distance telephone networks of the era. The leading communication technology of the times allowed Ward’s to communicate sales, performance, and inventory positions from each of their Distribution Centers to the main offices in Chicago. The telegraph, and the teletype departments that followed it, provided connection to the different nodes of the network.

This does not mean that all decisions flowed to a single decider in Chicago. Ward and his management team could not manage their swiftly growing company making all the decisions. The Ward team in Chicago trusted the managers in each of the distribution centers to run their operations. Managers focused on the operation before them, reporting up production data, inventory changes, and other key performance indicators. Managers in Chicago used that data to plan inventory, purchasing, and distribution of capital.

Vertical Integration to Integrated Supply Chain

The difference between the way Ward’s operated in 1915 and the way many companies operate today is the ownership of the assets and resources. In 1915 the Montgomery Ward Company owned most of the supply chain assets; they owned the inventory, the buildings, the equipment, the systems, and directly employed the people who made it all work. Ward’s was vertically integrated—a typical business-design doctrine of that period. Companies like Ford, Firestone, and Sun Oil owned all the processes through their respective supply chains.

Today a company may not own any of these components. Consider Apple Computer. Apple does not make the iPhone; Foxconn does. Apple does not own the inventory; different suppliers and banks own the components and finished inventory. The employees who make the phones and manage the process are not on Apple’s payroll. Apple doesn’t own any of the facilities or equipment. Apple still maintains vertical integrated control of its supply chain through design and contracts with third parties who provide specific services. Apple chooses its suppliers and service providers based on the needs of specific supply chains. Each third party must demonstrate capability and competence for the job assigned to them. The more capability a service provider or supplier has, the more likely they will earn Apple’s business over the long haul.

Look across other industries and you see a similar supply chain design, albeit with different forms of execution and success. Few companies manage their supply chains as well as Apple or Dell. While it may appear that technology companies have the best capability to create an integrated supply chain across multiple entities, other industries also have that ability. In the automotive industry, Tier-one suppliers like Johnson Controls, Robert Bosch, and Magna provide more than just parts—they provide integrated assembly manufacturing, logistics, and even direct-to-the-production-floor delivery services in intense, deadline-driven environments. Companies like Bosch even outsource the actual logistics operations to 4PL operators like UTi, who take financial stake of owning the work in process inventory throughout the supply chain.

It is difficult to maintain this level of integration across the different departments of a single company, let alone among different business entities. To likewise integrate different businesses in different countries—speaking different languages, using different currencies, each operating under different regulatory structures in different cultures, operating in different time zones with different levels of infrastructure—multiplies the difficulties.

Consider that human decisions affect the typical international shipment at least 72 times as it moves from factory to consumer. Documents and information ripple with each move down the chain. Thousands of instructions trigger events that cause action, planning the movement of material down the chain, creating the finished goods, and the flow of cash up the chain. When a single shipment creates thousands of different human interactions, can a single tool manage all that detail?

The Holy Grail – the Doctrine of Control

A single systematic platform for management and control is the Holy Grail of integrated logistics. Many different system concepts have promised such a platform, starting with the Management Resource Planning (MRP) systems and growing into Enterprise Resource Planning (ERP) systems. Companies and businesses have poured billions of dollars into information systems in an effort to build the central control room concept.

Planning gets you just so far. The ability to communicate those plans is the necessary next step. The third step is monitoring, inspecting what you expect to happen. Did the truck arrive on time? Did it load with the right stuff? Is the paperwork complete? Did it depart on time? Where is the truck? Monitoring, when done right, tells you when things work—and when they don’t. Without it, supply chain managers have no visibility, no knowledge of what happens. Without monitoring and reporting, you are flying blind.

In some cases, blind is OK. But blind is not OK if you are operating an integrated supply chain.

Remember, doctrines are beliefs, the principles guiding the strategy, tactics, and operations of the enterprise. Companies that are out of control crash and burn. Companies that survive and thrive are companies that take control of their operations, choose their tactics, and make strategic commitments to live by the Doctrine of Control.