Every Supply Chain Should Have a Cloud Computing Silver Lining

When it comes to the latest developments in software technology, logistics and transport managers are usually at the end of the queue. There are many reasons for this – and a common one is that manufacturing and ERP applications take precedent – and when those wishes were fulfilled, there was relatively little budget left over for the logisticians who were looking to make operations more efficient

However, this is now changing. The current hot technology is Internet ‘Cloud Computing’. Not only is this set to change the way we all use computer technology, at work and at home, but supply chain operations are amongst the earliest beneficiaries.

What is Cloud Computing and how is it revolutionising our business operations? And how new is it really? The concept of the Cloud has its roots in the early days of the Internet as a business tool – and we sometimes forget that those days are not so long ago.

It was in the late 90s that IBM introduced the concept of e.business – bringing the Internet to businesses and not just as a gaming and surfing tool for young people. There was a time when presentations, articles and learned papers on the subject of the Internet were not complete without a diagram of a Cloud – representing the ether where information exchange took place. During my time with IBM EMEA’s Global Services Management Consulting Group – dating back a decade – all of my presentations had at least one ‘Cloud’ appearance.

Over the last decade the Internet cloud concept has seen several developments – and finally come full circle and returned as ‘Cloud Computing’. In the interim it has seen life as web enabled technology; web enabled applications; on-Demand computing; web services; and utility computing.

The concept has developed and with the introduction of Web 2.0 technology – and recently Web 3.0 – the improvements have been rapid, leading to Software as a Service (SaaS) and finally Cloud Computing.

What is in a name? In the case of Cloud Computing, quite a lot. All the other services found difficulty gaining traction. Non-IT managers simply did not understand and IT managers were reluctant to promote a technology which might undermine their role as custodians of technology.

In fact there is no significant difference between Cloud Computing and its predecessor (in name) Software as a Service. The Cloud terminology appears to have been created by Microsoft – as a marketing term which makes the concept easier to understand (and helps people like me to recycle my old slides and diagrams!). The term has been accepted by other industry giants including Oracle and IBM and all of the major IT consultancies.

So what is different about the concept? Cloud Computing moves computing from the desk top to remote computers. Different computing devices such as personal computers, personal digital assistants, handheld devices and cell phones connect to remote computers through wired or wireless connections. Investment in licences, infrastructure maintenance and upgrades lies with the application service provider, not the user. The service is usually paid for from the operations budget – because there is no capital expenditure. This makes approval quicker and simpler.

This simple explanation shows why the Cloud is so important for supply chain management; and also why it is seeing more development and acceptance in the supply chain than in manufacturing. It also explains why budgets are not the overwhelming constraint that they used to be – the service is often paid for from an operating budget, making approval quicker and simpler.

For supply chains to operate effectively and efficiently, a real time exchange of knowledge and the ability to collaborate with external and internal partners – suppliers, customers, logistics operators – to manage events in real time is essential. However, this has never been achievable until now. The Cloud brings this capability – without capital expenditure and with costs directly related to the level of business you are conducting.

Manufacturing processes do not benefit to the same extent as supply chain processes. The ability to share real time event information with partners, while being critical in supply chains, is not usually essential in manufacturing. Also, manufacturing processes are often unique to product ranges, and frequently to individual companies.

Supply chain, and in particular logistics, processes are shared across many sectors and most product ranges. They follow the same basic principles and goals and use similar resources. While there are differences, they are not as radical as in manufacturing.

So where has Cloud Computing or Software as a Service (SaaS), been finding willing users? The first break through was with SalesForce, and the success was rapid when this sales and lead management application was moved from the desktop to the Internet. Since then CRM, Human Resource Management and email services have rapidly emigrated from the desktop to the Cloud.

What about supply chain applications? These are being developed rapidly and it is good to see that British companies are amongst world leaders. A leading example of this is Feltham UK based Deltion, http://www.deltion.co.uk – providers of CarrierNetOnline (CNO) Software as a Service.

CNO is a logistics and transport management system – available only over the Internet. Users pay on a transaction basis and only for the features they need. Transaction costs grow as the business grows; users who find that current market conditions mean less freight carried pay less until the business turns round.

CNO users include industry giants such as UPS and TDG and a recent signings include a household name food producer and one of the country’s biggest suppliers to the building trade. Operators of smaller fleets are also users – benefitting from low transaction related charges.

Logixcentral is an Internet based solution from long established Birmingham UK company, DPS International. This is a Cloud Computing version of DPS’s long established LogiX routing and scheduling solution. It has proved successful not only with logistics companies and in-house freight operators, but also with companies in the service sector running car and van based services.

Another Cloud hosted Supply Chain success story is Oxford, Uk based OmPrompt – http://www.omprompt.com. OmPrompt was founded to create 100% truly-connected trading communities, whatever the trading partners’ technical capability, providing more efficient EDI solutions and automating the manual processes or message flows. OmPrompt distinguishes itself with its ability to rapidly on board trading partners to trading communities.

So is the technology Cloud here to stay? Industry analysts Gartner believe so. In a survey published in December 2008 they reported that nearly 90% of organisations surveyed expect to maintain or grow their usage of SaaS. The firms cited cost-effectiveness along with ease and speed of deployment as primary reasons for SaaS adoption.

More than one-third of respondents indicated that they had plans to move from on-premises to SaaS. The key drivers included total cost of ownership, and unmet performance expectations with on-premises solutions, in addition to changes in sourcing strategy.

What does the Cloud hold for supply chain applications? I believe that Cloud Computing offers managers throughout the supply chain an opportunity to catch up with the advances in technology which other parts of business have enjoyed for many years: at lower cost; without capital expenditure; avoiding business disruption; and without significant consulting and implementation fees. We are entering a new age of supply chain and logistics technology – and this Cloud has a silver lining.