Cloud Computing: The future of Supply chain management

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.

Cloud computing promises to enable a wide and powerful range of capabilities; yet its potential uses are exceptionally broad and difficult to foretell. What is certain is that—in the years to come—it will radically reshape how computing power is sourced and managed, how information is controlled, and the economics of supply chain information technology.

Profound implications

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 life cycles 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.

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. They include planning and forecasting, logistics, sourcing and procurement, and service and spare parts management

Yet the promise of cloud computing also raises concerns and risks that executives must take into account when formulating their strategies. Collaborating with the existing 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. Security is another major prime concern. 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. 

Approaching the tipping-point

Considering the risks, 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, and the experts believe cloud will be no 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.

Cloud computing likely represents the next step in this progression. When this happens, we believe 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.

Initial steps to entering the cloud

As companies plan and prepare their cloud strategies, there are six initial steps that Accenture believes they should take. These are:

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

2.      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. 

3.      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.

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

5.      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.

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

References:

1. http://www.logisticsmgmt.com/article/supply_chain_technology_cloud_breakthrough
2. http://www.logisticsmgmt.com/article/cloud_computing_and_supply_chain_a_natural_fit_for_the_future/
3. http://smartdatacollective.com/onlinetech/99516/cloud-computing-use-increases-among-supply-chains
4. http://www.informationweek.in/cloud_computing/12-09-26/impact_of_cloud_computing_on_supply_chain_management.aspx