By 2012, research firm IDC estimates that $7.7 billion will be spent worldwide on cloud services, but the lion’s share of it will go to ERP (enterprise resource planning) and CRM (customer relationship management) cloud services providers, not to supply-chain management. Supply-chain cloud solutions lag the marketplace, but there are signs now that initial enterprise trepidation about outsourcing supply chains is starting to fade.
“There are two aspects to the benefits of cloud-computing models for manufacturing and logistics organizations,” says John Brand, research director at Hydrasight, an IT research and analysis firm. “One is to remove the internal costs associated with running your own IT infrastructure. The second is the benefit of increased visibility across organizational boundaries, particularly if a third party is involved.”
What the cloud provides
There is widespread agreement that the single, most pressing issue for companies today with supply-chain responsibilities is to get their arms around their burgeoning supplier networks. Perhaps the most pivotal question for companies seeking the cloud, however, is the degree of integration they and their systems require with their supplier bases. There are two fundamental cloud-computing approaches to be considered: either a Web portal that provides real-time communications and collaboration capability between companies and their suppliers, or a fully integrated business-to-business (B2B) solution that not only provides real-time communications and collaborations between all parties, but that also performs transaction processing and data base updates in real-time.
For example, if you use a cloud-based supply-chain solution as a kind of Web portal that allows you to readily exchange information and to collaborate with your supplier bases on day-to-day issues, all you might need is deployment (which the vendor provides, coordinating with your IT department), training and optimization â€” again provided by the vendor, who presents best usage practices.
On the other hand, there are also organizations with heavy B2B integration needs for their supply chains. Building integration on this level takes time, whether you are approaching the project internally or with a cloud-based supply chain provider.
Anthony Butts, co-owner of Davis Powers Inc., a Chicago-based IT solutions and services provider, says CRM (customer relationship management) and ERP (enterprise resource planning) software is one of the largest cloud-computing applications for any business currently.
“Accessibility and delivery of the service via the Web has made it quite easy for organizations to build their own business processes into it,” he explains. “Older and outdated in-house systems have a hard time keeping up with amount of change these Web-based applications can provide.”
Butts also cites collaboration software such as Microsoft’s SharePoint as an example of cloud computing pushing its way into the mainstream, overtaking in-house applications such as Microsoft Office.
“I’m working with several clients now that are essentially ditching their file servers and moving towards putting all their documents, files and business processes on a web based intranet system,” he adds.
The next steps
Although companies have not moved as aggressively into cloud-based supply-chain management as they have into other cloud solutions, they are nonetheless moving forward because cloud-based supply-chain solutions can improve their competitive advantage. In particular, supply chain in the cloud is being adopted in industries like financial services, retail, high technology, groceries, and pharmaceuticals â€” with enterprises in North America and Europe making aggressive entries into cloud and spreading adoption into Asia as a result, since 75 percent of the supplier connections are there. Butts believes reliability of the cloud service or provider remains a major challenge.
“[For] connectivity to the service, SLAs need to be around 99.99, as 99.5 is too much downtime,” he says. “On the technology side, cloud systems need to find a common / universal data set or be able to import uncommon data and covert it to usable data.”
Understanding that the key to the cloud is a large base of qualified suppliers, cloud supply-chain management providers have also made it easy for suppliers to join their networks. It doesn’t cost 70 to 80 percent of suppliers anything to be implemented today on a cloud-based supply system. Those who actively engage in collaboration might see a fee of $2,000 per year, and those who are active B2B partners might see a $10,000 annual cost, but relatively speaking, it is inexpensive for suppliers to take part in cloud-based supply chains.
Portions of this story were excerpted from an article in World Trade magazine, a sister publication of The National Provisioner, part of the BNP Media portfolio of products. To read more on this topic, visit www.worldtrademag.com. Mary Shacklett is founder and president of Transworld Data based in Olympia, Wash.
Cloud computing and meat processingâ€” Andy Hanacek, editor-in-chief
With cloud computing still a very new idea to many business â€” not only meat and poultry processors â€” The National Provisioner asked Srba Stancov, information services programmer for Lansing, Ill.- based Land O’Frost, a few questions about how his company is taking advantage of the technology and how other meat and poultry processors might benefit from exploring it.
The National Provisioner: What applications in meat processing are best-suited for cloud computing applications?
Stancov: Land O’Frost has been using SharePoint as a private cloud for data sharing and collaboration. We have added logic and workflow to customize and do more complex tasks. Cloud computing has helped us become more transparent.
The National Provisioner: How challenging is cloud computing to implement?
Stancov: Like any new computer application, cloud computing can have its challenges. Complexity depends on the application. Implementation depends on the willingness and drive of the organization and its individuals to accept change.
The National Provisioner: Has the business world only scratched the surface of the power of cloud computing? Where do you see the technology heading, particularly for food/meat-related businesses?
Stancov: We are still on the brink of utilizing IT technology in the meat business. Customers like Walmart are showing us how data can be used to drive a business. In my opinion, our success in a large part depends on our ability to collect, analyze and react to data.