Supply Chain Goes to the Cloud
GOES TO THE CLOUD Global giants are deploying their own cloud computing platforms in SCM to reap operational benefits and potential savings.
Large-scale changes in supply chain management began towards the end of the last century. Industry Leaders rushed to move considerable volumes of North American and European manufacturing capacity abroad particularly provoked this trend. For managers, it was simple math: It costs much less to manufacture in Asia that the extended supply chain and surplus cost was more than off by the financial
gain coming from labor arbitrage.
The biggest disadvantage though, was a longer and even more complex supply chain system that required products to be at the selling hub in North America and Europe. A lack of long-lasting transportation infrastructure in the Asia Pacific region, and the absence of reliable transportation and logistics data,
complicated this issue.
In the European Union or United States, if a retailer ships, it typically involved putting the product on a delivery truck and the same driver making the delivery within the next 48 hours. In today’s world of global supply chain management, it can take much longer - three to four weeks - to deliver the same product to the consumer. On top of this, it is further aggravated by rapidly increasing fuel costs, which directly affects slow-steaming in ocean liner carriers. Domestic shipments, although, are much simpler, with less trading partners and a less complex supply
A complex network of supply chain tends to be affected by the rapidly-changing state of today’s business milieu. This further leads to a gap for dynamic responses predicting that supply chains are largely unprepared to put up with.
One basic challenge is the ability to track the product as it moves through extended networks. Earlier, all it took was an email or a phone call to a domestic carrier to know where your product was. That is no longer the case. An international shipment these days, requires at least a dozen trading partners, all with a very specific and important role to play: manufacturers to ocean carriers, brokers, pier draymen to destination draymen and freight payment companies.
Supply chain visibility or SCV was until recently an unknown term due to technological limitations. The landscape is now changing swiftly, largely to connect a large number of trading partners. In spite of efforts to build technology would be allow companies greater visibility, the reliance on one-to-many connectivity requirements still remain a bigger challenge. A shipper may need to connect with hundreds of trading partners, and that is the biggest challenge in international shipping. A majority of trading partners is small companies that lack the capabilities to be connected globally. When you cannot connect with all your trading partners, you’ve practically left a gaping hole in the supply chain management system. This further makes data and reporting ominously unusable.
Another challenge for service providers, is that every carrier would individually connect with each of its major trading partners and customers, with its own specific role and requirements. This creates an unnecessary burden of communication as well as the need to keep up-to-date information on hundreds of communication connections and customer portals.
The answer to these challenges is a cloud-based, multi-tenant platform. It could be viewed as a community of customers and service providers, pretty much similar to the concept of a community for transportation and logistics.
Here, shippers, receivers and service providers are all gathered on the cloudbased community and readily connect one another. One can go online and friend a chosen air carrier, truck line, or ocean carrier. The service providers can friend its customers and clients. This way, companies can tap into an existing network and enjoy the benefits of a cloud-based supply chain system.
A manufacturer, only needs to put core information out there - changes, contacts, scheduling, pricing and service options. Once updated, all trading partners can see the information at the same time. Today’s cloud-based supply chain system provides an end-to-end visibility, at Stock Keeping Unit level. Once companies have that, they can see into the supply chain and determine what is causing the disruption. Similarly, a cloud-based supply chain offer a glimpse from the inside, letting manufacturers and shippers know what is causing the transit-time variability.
The long-term benefit of a cloud-based supply chain management system is that partners can take corrective action, adjust their plans to remedy the system. With a reliable cloud-based supply chain system, companies can improve their performance - remove the excess inventory from the pipeline.
Retail chain Zara has over 2,000 stores in 86 countries, and more than 450 million items sold annually. It is renowned for its ability to deliver goods to stores quickly and in small batches. Items are delivered twice a week, at precise times, store managers order clothes, and twice a week on schedule for new garments to arrive.
To reach this level of accuracy and effectiveness, Zara controls its supply chain in a very different way than most retailers do. It keeps most of its production in-house. The in-house production of goods allows it to be flexible in the amount, frequency, and variety of new products.
It designs, manufactures, distributes, and retails clothes within 2 weeks of the original design first appearing on the runway. To achieve maximum effectiveness, Zara commits to only 15 to 25 percent of a season’s line. This means that 50 percent of its items are designed and manufactured during the season. If any of the items become highly popular, Zara instantly creates a new design in the popular style, and gets new items delivered into stores while the trend is at its peak. Its cloudbased supply chain system acts as a competitive advantage. Its inventory management software allows store managers to directly communicate with customers, receive feedback on what items they’re looking for, what they like and dislike. Based on the data received from the feedback, Zara’s designers are able to sketch garments.
These changes give customers a sense of exclusiveness. This strategy has helped Zara reduce mark-downs, inventory piling up in the supply chain from raw materials to finished goods, and sell more items at a full price.
This type if inventory optimization model is generally used by companies that want to determine the quantity to be delivered into a single retail store twice a week. The stock delivered is limited, so each store receives just what it needs. This helps the brand image look exclusive, and excess piling of unpopular stock is avoided.
At the core of Zara’s success is centralized enterprise resource planning. Inventory, logistics, and products are managed in the cloud-based supply chain system. Operations are monitored in real time and changed accordingly.
Cloud-based supply chain management has helped Zara reduce mark-downs, inventory piling up in the supply chain from raw materials to finished goods, and sell more items at a full price.
A cloud-based supply chain management solution has several advantages over localized supply chain management. Most notably, it is typically more efficient, affordable, safer, infinitely scalable, and much easier to integrate with existing systems.
Affordable: Cloud offers the option of scalability without leaving a deep hole in the pocket for infrastructure and maintenance. It requires no upfront capital expense with cloud services. Moreover, services and storage are available on demand with the prices offered on a payas-you-go service.
Scalability: Cloud offers increased flexibility and scalability for evolving IT needs. Availability: Cloud providers have both, the bandwidth and the infrastructure to accommodate business requirements for high speed access, applications as well as storage. It provides an opportunity for load balancing to make sure systems aren’t overloaded and there are no minor bumps such as service delays.
Efficiency: By reallocating information management, operational activities to the cloud, businesses can have an opportunity to focus on innovation and R&D.
Resiliency: Whether there is a natural disaster requiring a site in a different location or just heavy traffic, it offers solutions in real time.
IMPACT OF CLOUD COMPUTING ON SUPPLY CHAIN MANAGEMENT
As supply chains keep on becoming leaner and, the odds of vulnerabilities and breaks in one link are bigger. One broken connection will unfavorably affect other links. The assets required to maintain and grow an IT infrastructure to support the needs of the business can be massive. Cloud computing is a cost-effective and rapidly deployed solution that supports business needs when executed following some best practices.
Most entrepreneurs have the vision and the ability to manage their supply chain systems, yet the presence of Cloud-based supply chain system gives them access to the same data with maximum effectiveness with less time and effort spent on the task. A supply chain management service highlights a disentanglement of the more ordinary bits of running a business, allowing businesses and its employees to focus on the tasks that matter.
Ultimately, Cloud computing is a technique that can streamline processes to ensure maximum effectiveness, integrate data from different systems, and support decision-making. The consequences of picking this system additionally integrate cost and time for retail companies who never have enough of either.