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.

Industry Leaders - - Content Features -

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

chain sys­tem.

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.


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.

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