American Shipper recently visited the global headquarters of C.H. Robinson’s managed transportation services subsidiary in Chicago to get a first hand look at the company’s transportation control tower, which shows how a managed TMS works in practice.
The idea of a transportation control tower is, by its nature, tied to an image. A tower overseeing all beneath it to provide efficient order. That image is meant to promote the idea that something—a team, a system—has things under control.
The control tower concept can also invoke other images that aren’t so reassuring—workers scurrying around a manic “situation room,” keeping tabs on all the things that could possibly befall a global supply chain.
Except modern control towers aren’t really like either of those images. In fact, they’re typically prosaic office settings where supply chain professionals calmly go about their business working to make freight transportation as smooth and cost-effective as possible for customers.
American Shipper recently visited the global headquarters of C.H. Robinson’s managed transportation services subsidiary in Chicago to see firsthand just how such a control tower functions. The subsidiary, TMC, occupies the top three floors of an otherwise unassuming brick building in Chicago’s West Loop area.
From that site, TMC personnel manage the transportation networks of customers across North America and the globe. It’s the biggest of TMC’s six control towers globally (the others, listed in order of size, are in Amsterdam, Shanghai, Sao Paolo, Mumbai, and Wroclaw, Poland), and accounts for around three-quarters of all TMC staff.
The concept of control towers in supply chain has been gaining in popularity for several years, spurred by growth in both the usage of transportation management systems and third party logistics services providers to manage specific elements of a company’s transportation and logistics network. But they’re hardly anything new.
A quick web search of the term yields countless results—virtually any TMS, visibility, or end-to-end supply chain software provider offers some form of a control tower. What’s more, most global 3PLs will also offer such services. In fact, it can be argued that large 3PLs are the ones best suited to provide control tower solutions to global shippers given they generally have a large global footprint and some form of transportation procurement, management, and visibility technology.
TMC’s value proposition is to blend those two areas of growth—TMS and outsourced logistics services. The company painstakingly notes in its literature and during interviews that TMC functions independently of C.H. Robinson’s massive freight brokerage and forwarding operations. TMC staff is expected to pick the best carrier, best route, and best mode for a particular piece of freight, regardless of the source of that capacity.
Jordan Kass, president of managed services at C.H. Robinson
“The credibility of our customer base really tells any skeptic what they need to know about the neutrality of our program,” Jordan Kass, president of managed services at C.H. Robinson, said in an interview with American Shipper. “It’s not just the customer either. We’ve proven our neutrality to the carrier base, and in many ways they were the most skeptical audience we had. Today, they provide some of our best references.”
Transportation Vs. Supply Chain. It’s important to note that what TMC offers through its network of control towers is outsourced transportation management. Some views of control tower see it as more far reaching, providing a true end-to-end management of supply chain activities, from the upstream points before product becomes freight.
From the Chicago headquarters, TMC teams coordinate more than 4.2 million shipments annually, representing roughly $2.8 billion in freight spend, according to the company. Its customers include Microsoft, Ocean Spray, Tetra-Pak, Cummins, Oshkosh Corp., Boise (a provider of packaging solutions), and IPC, the independent purchasing cooperative for Subway. A large majority of TMC’s customers are global shippers in which TMC is managing their freight in multiple regions around the world.
Teams are divided into sections around the Chicago office by vertical, and then by specific customer. The separations aren’t hard and fast (a stray consumer products company may find itself near the automotive group because of space), nor are they so segmented that there isn’t knowledge-sharing occurring between vertical teams.
TMC Chicago headquarters
The tone of the office is noticeably different from C.H. Robinson’s sprawling campus outside Minneapolis. There, young professionals pound the phones securing capacity from the company’s network of carriers to sell to its network of shippers.
At the TMC office, calmness reigns. Most of the teams are pouring through data using C.H. Robinson’s proprietary TMS platform, Navisphere, the system that binds each of the control towers and customers together. The company invested heavily in Navisphere, which it unveiled in 2012 to improve the back-end and user interface of its previous in-house TMS. A corner of the TMC office in Chicago is dedicated to TMC-specific IT engineers, who coordinate with a much larger IT staff at the C.H. Robinson headquarters.
The office is more a mixture of digital and analog than one might suspect. In one corner, an array of monitors nicknamed “the drone” performs automated routine functions across the TMC customer base to alleviate the need for humans to carry out perfunctory tasks. The goal, TMC staff told American Shipper during the visit, is to shift as many of these routines to so-called bots, programs that run simple and structurally repetitive tasks.
C.H. Robinson’s “Drone”, used for automation of TMC tasks
Around the corner, an entire room is dedicated to North American supply chain management for a particular TMC customer. Sheets of color-coded paper line the walls denoting progress and performance metrics for individual processes—such as truckload procurement in a particular region.
A key milestone in the evolution of TMC was landing its initial customers, companies that took gambles that handing over the reins of their transportation network made sense.
Kass described the problems facing one such early TMC adopter, Tetra-Pak.
“The first meeting I went to introduce the control tower concept was in Frankfurt,” he said. “They flew in people from all over the world. We were walking through why it made sense to consider a control tower approach and to set the table, we had each component of their supply chain share brutal facts of their part of the supply chain. It was fascinating how, for example, they would tender a shipment to a carrier in Poland who only spoke Polish, and deliver it to someone in Germany who only spoke German.
“Everything was lost in translation, on different time zones. We deployed the TMS in 23 languages, it automatically translated to their language and currency. One version of the truth and that eliminated all the obstacles,” Kass added.
The Global Network. The currency and language barriers might seem innocuous, but they can be a major constraint in global transportation management. It’s also a primary selling point for TMC and its control tower approach. Not only does Navisphere take into account global modes, languages and currencies, but TMC’s staff know how to leverage their own system better than anyone, while having personnel in key locations worldwide brings local supply chain expertise that’s hard to replicate.
The placement of the control towers was no coincidence. It’s designed to provide TMC with “follow-the-sun” capability, so that workflow is continuous around the globe.
“There’s definitely a science to where they’re located,” Kass said. “At the most basic level, every control tower is in an important transportation hub. Those are all focal points for customers in terms of thinking of it like a logistics hub. They position us well relative to where our customers are located.”
But Kass said the control towers are also hubs of supply chain talent. Places like Amsterdam and Shanghai are brimming with professionals steeped in the business of moving freight. That’s important because TMC is not a simple business process outsource (re: call center) play. The target for TMC is professionals who think and act as an internal director of transportation at a shipper would.
“All these locations have deep access to incredible supply chain talent,” he said. “We’re not staffing this with a call center-type of employee. We’re focused on building supply chain experts and experts in logistical engineering.”
Some of the control tower staff comes from other divisions of C.H. Robinson—often standing out for their analytical aptitude. Others are recruited externally. The Chicago office was built to lure talent in a market rich with ambitious, technology-oriented job seekers, but one in which competition for that talent is fierce. Providing a workplace that stands apart aesthetically and fosters a sense of accomplishment is a key part to winning that battle.
The other uphill battle is convincing shippers of the benefits of the control tower approach.
“Very few companies in the world have invested in creating a global platform that can service all regions and all modes, and even fewer have invested in that platform, plus a control tower network, to support it,” Kass said. “Our investment in those two innovations is driving significant growth and interest in our business.”
What’s driving the growth of control towers is shippers’ desire to have more visibility into the status of goods from production through to final delivery, or some specific part of that journey. What’s enabling that growth are technology platforms that provide information simultaneously to not just the shipper and carrier but other shipment-related entities. Those platforms tend to be cloud-based, as TMC’s is.
Bear in mind, many control tower initiatives are undertaken by shippers themselves, fueled by supply chain execution and visibility technology that allows them to take these functions into their own hands. But not every company has such ambitions. And the differences between companies looking to build their own control towers versus those looking for a managed approach often have nothing to do with size or complexity. It’s often a question of whether transportation is considered a core function, or whether it’s better suited to be outsourced.
Control Tower Vs. 4PL. It might be helpful to also think about how control towers differ from the 4PL concept that was prevalent more than a decade ago. Many analysts have called control towers just the newest iteration of the 4PL approach to supply chain management, where a third party not only doesn’t use its own assets to manage logistics for its client, it also sits a layer above and manages logistics across all carriers and logistics providers.
Kass believes the control tower concept is much more well-defined than the 4PL concept ever was.
“I never felt that our industry has had a standard definition of 4PL,” he said. “There’s a propensity to create an alphabet of terms. As a service provider, I can get an RFP for 4PL services and they all can look different. The things we’re focused on that make us different is we make the decision to tackle every mode and every region on one platform. That’s what differentiates a control tower.”
The control tower concept is especially relevant today, he said, as cargo moves in different patterns relative to the traditional supplier-to-manufacturer-to-distribution center-to-customer structure that evolved over time.
“Today, it’s no longer that way,” Kass said. “It might be bypassing the DC, direct to consumer. But because the shipper still has traditional channels, they still need to use a warehouse, direct-to-store channels, and cross dock. There are customs transition points, free port trade zones. Multiple channels and geographies. You have to be able to leverage every mode of transportation.
“And shippers have complex multi-leg shipments. You need an origin and a destination team to hand it off to the delivery team on the other side of the world. That’s not software, that’s software, process and talent and how you orchestrate it all,” he said.
So where does TMC’s control tower work begin and end?
“Our participation is from order fulfillment to freight payment,” Kass said. “Some of our customers send us a shipment when it’s a shipment. The overwhelming number send us an order. It may be a [purchase order], some type of order. Then we organize that into the appropriate optimized transportation.”
He added that TMC is intentionally moving upstream with its customers.
“We have some companies where we’re looking at customers’ inventory levels and working with material flow to determine the amount of inventory to hold to optimize transportation. You need to update the transportation plan to account for that.”
For instance, Kass said, if the company ships a truckload every Wednesday, but then its volume drops, that changes things. It might precipitate a switch to less-than-truckload.
“If I were to look into the future, I see our services and capability moving upstream into inventory,” he said. “This transformation started when transportation planning used to be decentralized. It used to sit at the plant. With technology, you can centralize the process and still give visibility and even control to those people. What’s happening is, you look at most shippers and the individual facility is saying ‘I need a part.’ Then you have to understand, how does that marry up to transportation? And if it’s happening all over your network, and you’re only solving for your problem, you’re sub-optimizing your ability to solve for a much bigger problem. That will be the next step, because now I can help a shipper solve for the lowest landed cost and not just a piece of it.”
As part of the larger managed transportation services market, Kass said each TMC customer has unique requirements and differing outsource horizons.
“There are definitely customers who initially need a managed service and then want to transition to a self-service solution where they operate our technology,” he said. “We also have scenarios where we operate the customer’s legacy TMS. In these scenarios they don’t have the resources for another IT integration, but require expert talent to run the TMS and drive continuous process improvement.
“But the overwhelming majority of our contracts are three years in term, minimum,” he added. “Many of them are five to seven years in term. This typically appeals to the larger shipper and certainly the multinational global shippers we work with.”