Where Cloud Computing Is Improving Supply Chain Performance
A recent study authored by SCM World titled Supply Chain And The Future Of Applications provides several interesting insights into how cloud computing applications and platforms are improving supply chain performance. The methodology is based on a combination of qualitative interviews and data analysis to break the question of cloud applications down with an eye to simplifying the issue for operational leaders. The sampling frame is SCM World members globally.
SCM World is the leading global community of senior supply chain professionals with over 150 companies participating and contributing including P&G, General Mills, Nestlé, Samsung, Lenovo, Nike, Walgreens, Merck , Jaguar Land Rover, Raytheon, Chevron, BASF, GlaxoSmithKline, Intel and AT&T.
Sales & Operations Planning (S&OP), Transportation Management Systems (TMS), Spare Parts Management and Store Shelf Optimization are the four supply chain strategies that are the most cloud-friendly and have the greatest potential to deliver the network effect throughout a supply chain. The following analysis compares the relative contributions of the network effect versus the sensitivity of data sharing. According to the report, “the network effect is maximised for functions that are best served when a large number of suppliers and/ or customers benefit from rapid access to information that can streamline business.”
Cloud computing adoption in supply chains is heavily dependent on the legacy ERP systems in place, as they provide the system of record corporate-wide. 56% of survey respondents have standardized on SAP ERP systems followed by Oracle (including PeopleSoft & JD Edwards) 16% and the remainder being multiple ERP systems. 7% of respondents don’t have an ERP system today. The report notes that the technology stacks of respondent companies attempting to migrate to the cloud have been developed and deployed in layers and is generally hard to modify in response to changing business conditions. Applications in these stacks include specialty tools including transportation systems (TMS), warehouse management systems (WMS).
Companies continue to lean on their IT departments to do more with less. Reality is, IT departments are focused on maintenance of existing systems and infrastructure and only allocate, on average, about 11% of their budget to new applications.
Only 12% of enterprises have “extensive” communications with their network, while over a quarter are still relying on emails, phone calls and faxes. The study uses a case study based on The Limited is a large apparel retailer based in the Midwest of the United States to show why more agile, real-time communication throughout a supply chain is essential for growth.
The majority of suppliers (60%) have a moderate level of collaborative execution with Electronic Data Interchange (EDI) and other automatic/scheduled communications being commonplace. A leading global heavy equipment manufacturer had been managing their multi-billion dollar business emails, faxes and phone calls. This manufacturer chose GT Nexus to create a platform for all the carriers in their network to send their EDI messages, which significantly improved visibility across their $500M per day of in-transit inventory.
On-boarding new trade partners continues to be problematic for the majority of supply chain organizations with less than 30% of a recent survey of 374 respondents claiming they had no problems “connecting or on-boarding new trade partners.” The report concludes that with greater electronic integration, the many benefits of the network effect will be gained across global supplier networks.
46% of respondents report that greater supply chain collaboration leads to problems being solved twice as fast. Cloud computing platforms are becoming more pervasive in large-scale supply chains as enterprises look to gain agility and speed in resolving complex problems through more effective collaboration.