The Future Of Cloud Application In Supply Chain (Guide)

In today’s fast-moving business environment, most companies are striving to operate a more dynamic supply chain to respond to rising volatility in customer demands and market conditions. Because supply chains are increasingly powered by information technology, flexible IT-based solutions are an increasingly important part of a supply chain design. 

Against this background, it is no surprise that the topic of cloud computing is generating intense interest. History has taught supply chain management organizations one common factor: failure to adjust to societal changes will contribute to business-downfall. In the modern, digital world, the impact of the cloud can be felt in every facet of existence, not just commerce. 

Cloud computing technology has allowed supply chain management providers to take advantage of a new era of processes, specifically those relating to the ethereal space. Traditionally, supply chain management has relied on physical, in-person processes.

In a survey conducted by IDG on behalf of Oracle, Supply Chain leaders express their thoughts on why and how the cloud can impact their business.The cloud, in conjunction with the Internet of Things, has enabled rapid collection of data from various resources and analysis of this data. Ultimately, this allows businesses to make better decisions for how daily activities behave.

In close relation to integration of systems, cloud technologies remove physical and political boundaries from the supply chain management perspective. Since many cloud hosts rely on common practices for accessing, storage, and retrieval of cloud data, the same information may be altered from any place on the globe.

There's a wide range of strategic advantages in going to the cloud. The adoption of new technologies is crucial, operational efficiency is a key advantage and avoiding disruption and working secure using an end-to-end integrated SCM solution is preferable. In terms of outcomes, companies want an end-to-end, integrated SCM solution that offers a wide range of functions.

Although companies are ready to adopt cloud-based SCM solutions, they need to be convinced, particularly over business benefits and full vendor support. When in the business of using digital resources, such as those used for e-commerce, a business needs to ensure customers can resolve problems with their system at virtually any time. 

Therefore, most cloud hosts offer 24/7 support for those using their services, which can be rerouted to correcting issues with your customers without your input if you prefer. The use of cloud technology provides a buffer against market volatility. US manufacturing is no stranger to the damaging effects of market volatility. 

Less than a decade ago, the US saw the worst economic collapse since the Great Depression, and supply chain management providers must always be wary of how resources will be used in the event of a collapse. Essentially, partnerships between a supply chain management provider and a cloud host are subject to renegotiation, or even cancellation, if the market suddenly declines.

Throughout the supply chain, cloud technology can also reduce the amount of workers needed to perform specific tasks. For example, the cloud, could be used to automatically generate a report of needed product at a specific warehouse, trigger the respective shipment, and account for the product when received at the destination. 

As a result of minimizing human-input within the order processing, those employees may be then reassigned to other physical aspects of the supply chain. Additionally, supply chain management providers reap the benefits of lower security, IT, data analysis, and more. Since cloud technology insulates supply chain management providers from market volatility, it can also be used to achieve rapid scalability.

As a budding business begins to experience higher demand for product, the respective supply chain management provider may need to increase production by factors of five, 10, or more. With each additional order comes the strain of extra bandwidth and processing capability, which cloud technology provides. 

Within minutes, a supply chain management provider can extend the terms, or services, with the respective cloud host to account for the instant growth in capability. Furthermore, the use of cloud-based analytics allows businesses to isolate key inefficiencies within the order fulfillment process, which will further grow the respective business.

When evaluating the potential of cloud computing, supply chain executives face a different set of challenges from their counterparts in other key business functions. Specifically, they need to pay close consideration to several fundamental changes that adoption of cloud computing will drive in supply chain:

New competitors: Cloud computing has the potential to enable start-up companies to establish themselves in a short period of time without significant investment in infrastructure, disrupting the established competitive landscape.

Speed to market for new products and services: The pace at which new revenue-generating products and services are introduced has put growing pressure on supply chains in recent years. Cloud computing will accelerate that pace even more.

Large-scale transformation: New competitive threats and shortening product and service lifecycles will drive companies with traditional, infrastructure-intensive supply chains to re-invent themselves, adopting cloud-based supply chain solutions to enhance competitiveness. 

As a result, supply chains will become more dynamic, more scalable, and more capable of supporting the financial objectives of boards and shareholders. Yet the promise of cloud computing also raises concerns and risks that executives must take into account when formulating their strategies. These include:

Collaboration and the partner eco-system: Very few companies control, own or operate their entire supply chain internally from end-to-end. So decisions about using cloud technology may involve multiple partners, creating complexities and sensitivities between the participating organizations.

Competitive essence: High performing companies use sophisticated and effective supply chain management to differentiate themselves in the marketplace and gain competitive advantage. So, they must establish how can reusable applications and processes—which are not specifically customized for their business—deliver what they need.

Security: Whether operating on traditional or cloud infrastructures, companies have an absolute need to protect their products and customers. Lost data can lead to lost intellectual property, lost products, lost customers and lost business. So security is a prime concern.

Given these considerations, it is not surprising that companies are moving relatively cautiously towards leveraging cloud technologies in their supply chains. However, studies in various sectors show that interest in the potential of cloud in supply chains is already strong. It will not be long before this high level of interest in SaaS in supply chain progresses into rising adoption of cloud-based services.

 Historically, supply chain operations have proven to be adept at adopting and capitalizing on innovative technology solutions, but cloud should be an exception. With capital already tied up in IT infrastructure, the next decade will see supply chains augment existing solutions with new technologies that will further enhance their speed and flexibility going forward. 

To date, these innovations have included bar-code/RFID tagging, mobile applications, and advanced analytics.When this happens, cloud computing will lead to a revolution in the way more supply chain services are provided, shifting away from traditional, contracted outsourcing models to more flexible, transaction-based models.

Key Processes Best Suited To Cloud Computing

Cloud computing is particularly applicable to supply chain activities where extensive customization is not required, or when the activity is performed sporadically (such as a sourcing “event”), or is not a “core” part of what makes the company unique. These activities are likely to be the first to make the transition to the cloud. We will now examine four of them in detail.

Planning and Forecasting: Cloud-based tools are now available for capturing itemized spend data, performing basic analytics, planning manufacturing runs and executing statistical demand forecasts. Applications focused solely on retail supply chains are also prevalent, with capabilities that include planning and allocation, assortment and space, pricing and promotion, and forecasting and replenishment.

In the near future, many more cloud service providers will add planning and forecasting applications to their offering. A primary reason is that planning and forecasting are rarely core components of companies’ ERP systems. This means companies can run one manufacturer’s ERP application internally, while simultaneously leveraging another’s best-of-breed planning/forecasting application via the Internet.

Logistics: Some core warehouse and transportation management applications already are available online from cloud providers. Over the coming years, more and more cloud computing applications for functions such as network strategy, inventory management, warehousing, and transportation will become available. 

Processes such as global trade compliance, replenishment planning, order processing, transportation load building, fleet management and transportation route planning are likely candidates.

Sourcing & Procurement: Cloud computing represents a great opportunity to reduce total cost of ownership—the most commonly cited success metric in sourcing and procurement. A key reason is that cloud-based tools are inherently collaborative and accessible, creating major benefits for companies that deal routinely with thousands of suppliers. 

For example, cloud-based collaboration allows multiple parties to jointly develop supplier contracts, dramatically enhancing contract management. Retail potential is particularly strong.

Service and Spare Parts Management: Many companies under perform in service and spare parts management, despite the fact that this area often generates a high proportion of an organization’s profits. Companies can gain significant advantages by using cloud computing to upgrade their capabilities and implement new processes rapidly without extensive capital expenditure costs.

Tools such as warranty validation are already available to service operations, and cloud applications for reverse logistics/returns processing, technician dispatch & tracking, and spare parts inventory pooling & distribution are expected soon.

Given the benefits that cloud computing can deliver, and the pace at which new supply chain-focused services are emerging, it is highly likely that most companies’ supply chain operations will soon embrace some level of cloud computing.While supply chain applications for cloud computing are still in their early stages, the technology itself is largely proven. 

By working “in the cloud,” companies have shown they can rapidly implement and operate applications that are secure and inexpensive, while enjoying lower maintenance and upgrade costs throughout the relationship.

Process management may also be improved, since cloud computing offers a highly collaborative framework with centralized storage and contact points, fewer visibility barriers, and the opportunity to enact simplified, standardized processes. A further advantage is elasticity, making it possible to scale up at pace with minimal waste of time and capital, and even to switch applications entirely without a lot of added cost or complexity. 

This brings the ability to enter new markets or launch new services quickly. As companies plan and prepare their cloud strategies, there are few initial steps that they should take. These are:

Develop your strategy: Which processes should you retain internally, and which processes might best be outsourced to a cloud-based services provider?

Define the business case: Develop a detailed ROI and risk analysis. Insist that prospective suppliers provide data-driven analyses to quantify the anticipated benefits, based on total cost of ownership.

Set the standards for success: Define what success will look like. Clearly, it will not be based solely on costs, so be sure to define the sequence and scale of benefits: flexibility, scalability, speed to market, etc.

Survey the market: Cloud computing is basically a new paradigm, with regularly emerging capabilities. Make a concerted effort to stay on top of developments.

Collaborate with supply chain partners: One of the benefits of cloud-based applications is easier integration, so it is particularly important to involve supply chain partners in decision making.

Evaluate frequently: Start with low-hanging fruit, and measure as you go along to ensure that the hoped-for benefits are being realised.

While it will take time for supply chains to transition to cloud computing, the operational benefits and potential savings from clouds are too great to ignore. So the question isn’t whether cloud computing will become a fundamental technology in the next decade; it is how successfully companies will profit from the capabilities it offers. 

If your organization has not yet started its journey to the cloud, now may be the time to start drawing up your roadmap. Digitization enables more automation in supply chains, which enables people to spend more time on analysis, strategic direction, and innovation. 

Your talent will now be able to develop new skills such as advanced problem solving, decision making, analytics, data management, collaboration (across functions & with machines), risk management and interpersonal skills. And, your organization will be able to develop new roles such as machine learning specialists or an AI ‘trainer’.

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