Cloud-Based Supply Chain Management: Unlocking Efficiency and Flexibility
It is hard to overstate the importance of supply chains to businesses. The ability of a business to meet customer demand, maintain a competitive advantage, and navigate market changes depends on the efficiency of its supply chain.
To create this efficiency, many businesses are turning to cloud computing solutions. In the last few years, cloud computing solutions have become immensely popular among enterprises of all types. This meteoric rise has been bolstered by the many benefits of cloud computing solutions that a business can enjoy.
These cloud technologies allow business owners to see their entire supply chain network at a glance, offer accurate forecasts of market changes, and automate several processes. Any business that wants to survive long-term will need to be able to transport its goods and services with ease. Cloud computing solutions have proven to make this process easier and have thus become highly sought after by business leaders across the world.
What is Cloud-Based Supply Chain
Before a business can begin to enjoy the benefits of cloud computing in its supply chain, it is worth understanding what it is. Cloud-based supply chain is the use of cloud services by supply chain managers to optimize, automate, and manage supply chain systems.
Think of how accounting software allows a business to manage its financial processes from one place. In the same vein, the entire supply chain can be accessed and managed using this technology. These cloud solutions are typically sold to companies as software-as-a-service and form an important part of supply chain management (SCM).
One thing to note about cloud computing is that all this information will be stored on remote servers as opposed to an on-site one. The setting up and maintenance of these servers are also done by the cloud providers as opposed to the companies themselves.
Cloud computing as a concept had been in development since the 1960s at MIT. It was not until the 1990s, however, that it became commercially viable for businesses to use. One business that did embrace cloud computing was Amazon in the early 2000s, which allowed the company to use only 10% of its own in-house computing capacity. Other companies soon followed suit and Amazon went on to launch Amazon Web Services (AWS).
Since then cloud computing has become a staple of organizations operating in the digital age and has created a global positive impact.
Advantages of Cloud-Based SCM
Enterprises continue to use cloud computing for supply chains for some of the following benefits;
One of the most obvious benefits of these solutions is the resource efficiency they offer. A business can spend tens, if not hundreds of thousands of dollars hosting its own SCM data. It can also reduce costs by opting for cloud computing instead.
Usually, a business will be charged a monthly or annual subscription fee for access to the cloud applications. This fee will likely be a fraction of what it would have paid to host and maintain their own systems. These cost savings can then be used for other things.
Scalability and flexibility
Because companies using these cloud computing solutions do not have to host and maintain them in-house, they are able to scale faster and with more flexibility. If a company wanted to scale its business and expand on the existing supply chains, it would only need to subscribe to a new software plan. No need to dismantle and rebuild a supply chain management system from scratch.
Whatever changes are made to the business model can be quickly reflected in its supply chain management thanks to cloud computing solutions.
Real-time visibility and transparency
Anyone who has worked in supply chain will tell you that it is quite complex. The good thing about cloud computing supply chain solutions is that they simplify these activities. From offering a quick access view of the overall supply chain, tracking individual supply networks, and making sure that these vast amounts of data are stored in a single source, the level of visibility they offer is unprecedented.
They also help to reduce the margin of error. Because these supply networks are so easy to access and view, more informed decisions can be made by supply chain managers. So not only do they save time but promote better decision-making as well.
Collaboration and communication
A successful supply chain relies on proper communication between all levels of management. When supply chain management infrastructure is cloud-based and so easily accessible, communication is made easier. Being able to easily access stock levels or track supply chain networks drives speed in decision-making and fosters greater collaboration.
This increased efficiency and communication also means that supply chain professionals can quickly respond to changing demand and retain their competitive advantage.
Data analytics and optimization
Managing a supply chain efficiently will involve storing and analyzing a lot of data. Opting for cloud computing solutions means that all this data is easily accessible and can be analyzed. Many of these cloud solutions also come with built-in analytical tools.
This technology can detect patterns in existing data, predict market shifts, and allow logistics professionals to make informed decisions with ease. Supply chain management tasks can also be optimized using these tools. Some for, example, can be optimized to automatically replenish inventory when it falls below a certain figure.
Disadvantages of Cloud-Based SCM
As much as cloud computing solutions can help in managing supply chains, there are some disadvantages to be aware of.
While hosting your supply chain data on the cloud can be safe, there is always some security risk involved. The internet is full of examples of business owners whose cloud computing account was hacked. Some have been locked out of these accounts and have had their bottom lines affected.
Hackers also try to target cloud providers in a bid to spread malware to unsuspecting victims.
Data privacy concerns
One of the downsides of having your supply chain data hosted on someone else’s platform is that you lose a bit of privacy. Technically speaking, your cloud computing provider can see all of your supply chain data. This is because of a practice called redundancy.
Redundancy happens when your cloud computing provider duplicates your supply chain data and stores it on several different servers. This is done to make sure that it is always backed up. This also means, however, that your data is not entirely private, depending on data laws in your country.
A common complaint among users of cloud computing services is that the technology is too complicated. With the sheer number of options in the market and the skill needed to properly leverage cloud computing, some business owners are finding it too much of a hassle.
In some cases, new talent has to be hired just to navigate an overly complex cloud computing process.
Accessing your remote supply chain solution provider is not always straightforward. If you were to face any connectivity issues, your supply chain operations would inevitably be affected. And because all your information is remotely stored, you would be at the mercy of these connectivity issues, hoping they are resolved.
These issues can also trickle down to business operations, causing supply chain disruptions and impacting customer satisfaction.
While there are a plethora of cloud supply chain providers on the market, switching from one to the other is not always an option. Those that rely on cloud supply chain services might find themselves dealing with vendor lock-in.
Vendor lock-in is a situation where the costs of switching from one cloud supply chain provider to the other are so high that the business remains with its current one. As you can imagine staying with a bad provider can negatively impact supply chain performance. This is why vendor lock-in can be so damaging.
Types of Cloud-Based SCM Solutions
The market is full of supply chain solutions that cover every aspect of management that a business might need. Some of these are as follows:
- Software as a Service (SaaS): This allows companies to connect to cloud-based applications remotely e.g. Google workspace.
- Platform as a Service (PaaS): This allows companies to connect to a cloud-based platform for developing and maintaining applications e.g. Microsoft Azure.
- Infrastructure as a Service (IaaS): This allows companies to connect to cloud-based IT infrastructure e.g. Amazon Web Services.
- Hybrid cloud solutions: This offers companies a mix of public clouds, on-site infrastructure, private cloud, and other solutions.
Implementation of Cloud-Based Supply Chain
To get the best out of cloud computing supply chain services, it is best to keep the following in mind:
- Cloud migration strategy: This is the plan companies put in place to move their on-site data to the cloud. This has to be thorough and well thought-out to get the most benefits.
- Cloud architecture and infrastructure: This is the way the different cloud technology, both hardware and software, interact with each other.
- Cloud security and compliance: The procedures and structures put in place to secure the cloud and the data it stores against internal and external threats.
- Integration with legacy systems: The ease (or lack thereof) with which cloud computing solutions integrate with existing computer systems.
- Change management and training: The procedures that will manage the change in supply chain management and how those involved will be trained.
Challenges and Risks
- Cybersecurity threats and breaches: With every digital transformation is the threat of cyber attacks and security breaches.
- Data breaches and privacy violations: When you share data with a service provider, you risk sensitive information being leaked.
- Compliance and regulatory issues: You will have to adhere to existing data laws when using cloud computing solutions.
- Integration and interoperability challenges: When switching from legacy systems to cloud-based ones, some challenges might occur.
- Human error and training gaps: Even with the best training, some gaps might still emerge and errors might still be made.
Supply chain executives have embraced cloud computing over the years and for good reason. Cloud-based software offers the supply chain industry a plethora of benefits from reduced costs to easy scalability.
Because there are some potential risks such as technical errors and connectivity issues, businesses need to approach their implementation with care. If you still have questions, read through the FAQ below.
What is cloud-based supply chain management?
The use of cloud supply chain tools to manage supply chains. These tools are accessed on a remote cloud server as opposed to a physical one and businesses pay a subscription fee to access them.
What are the benefits of cloud-based supply chain management?
Ease of scale, reduced costs, and ease of sharing data. Businesses are able to save costs that would have been spent on self-hosting the servers. More informed decisions can also be made because vital supply chain information is accessible in one place.
What are the risks of cloud-based supply chain management?
Potential risks include human error, as even the best-trained experts might make mistakes. Technical difficulties can also arise that threaten access to cloud-based tools. Finally, cloud-based supply chain tools carry some risk of security threats.