Tuesday, October 2, 2012

Cloud Computing and Supply Chain IT

This week’s readings about the role of IT in supply chain management (SCM) touch on the growing significance of the role of software as a service (SaaS), or “Cloud Computing” solutions. In their chapter dedicated to the discussion Information Technology in a Supply Chain, Chopra and Meindl predict that “reduced maintenance expense is likely to be a major factor driving customers to go for the software as a service model in supply chain software.”[1] Cath Jennings elaborates on this concept in her article in her 2009 ComputerWeekly.com article, Cloud Computing: The Answer to Supply Chain Woes, by presenting the concept of the “patchwork approach” in which companies adopt cloud computing in a hybrid manner. She cites several scenarios where cloud computing could improve overall SCM, but would be difficult to implement. One example of this is requiring offshore suppliers to file reports to the cloud for aggregate data analysis by the company. The article reports that high tech manufacturers would be the earliest adopters of such practices, but that industry wide change would unfold more slowly.

A more recent discussion of the pros and cons of adopting SaaS can be found in a September 2012 InformationWeek article, Impact of Cloud Computing on Supply Chain Management. The author, Michael Dominy, concisely lists some key considerations for companies as they face the decision of how to proceed with their SCM and cloud strategy. Dominy arranges these factors into three categories: Speed, Cost, and Business Value. Dominy summarizes the tradeoff associated with less investment requirements upfront, and long-term maintenance and usability. My take away from his overview is that SaaS can be a lower-cost solution that affords smaller organizations IT capabilities that they may not otherwise be able to implement. However, these organizations should be advised to consider the long term costs both explicit (service contracts) and implicit (compromised functionality). He warns that “The total cost of ownership (TCO) could also be more expensive for SaaS applications after five years, versus on-premises deployments for large enterprises with well-established data centers during the same timeframe.”[2] Cloud computing is changing all aspects of SCM: supplier relationship management, internal supply chain management, and customer relationship management. As companies experiment with new approaches to internal and external SCM, we will wait to see how it ultimately takes shape.

What capabilities does cloud computing afford companies as they continue to seek effective SCM IT solutions?

What are the tradeoff’s associated with implementing software as a service versus on-premises hosted applications?

[1] Chopra, Sunil, and Peter Meindl. Supply Chain Management: Strategy, Planning, and Operation/ Sunil Chopra, Peter Meindl. Bosten [etc: Pearson, 2010. Print.
[2] "Impact of Cloud Computing on Supply Chain Management." InformationWeek. Www.informationweek.in, 26 Sept. 2012. Web. 1 Oct. 2012. <http://www.informationweek.in/Cloud_Computing/12-09-26/Impact_of_cloud_computing_on_Supply_Chain_Management.aspx>.


  1. I found this article very interesting, specially the links provided, thanks for sharing!

    Despite the long term cost may look more expensive using cloud computing but there are other advantages as converting capex to opex, reducing one off costs, etc.

    Managed Cloud Computing

  2. Role of IT in supply chain management (SCM) touch on the growing significance of the role of software as a service (SaaS), or “Cloud Computing” solutions.SaaS ERP model offerings are typically smaller. This is normally best for organizations with limited complexity, size and global presence.


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