Cloud Can Unlock Supply Chain Innovations

Supply chain innovation can come from anywhere: A minor process change can streamline a time-consuming function or a full-blown MRP solution can automate such processes. One of the more promising platforms for supply chain innovation is the cloud.

The cloud, proponents say, enables better communication and collaboration across supply networks. The systems most often used by the electronics supply chain -- EDI, MRP or ERP -- are closed, costly, and don't communicate very well. Two key aspects of the cloud are enabling businesses to come up with new solutions to old problems, such as partner connectivity and cost.

First, the cloud is Internet-based and scalable, so it allows partners to share data across a supply network without a lot of upfront investment. Second, users can develop a set of "rules" that enable partners to see the information they need while protecting other data.

"ERP systems weren't designed to work across multiple platforms," explained Greg Kefer, director of corporate marketing for cloud-based solutions provider GT Nexus, in an interview earlier this year. "Every company's data is stored in 'silos;' in some cases a corporation will have more than [one] silo within its own four walls. The data simply isn't flowing across the [supply] network."

GT Nexus takes data, translates it, and makes the data available to select members of the network. Although the information is standardized, linked, and centrally stored in the cloud, it is also partitioned. It is visible only to stakeholders that have been granted permission. "Being part of a group does not necessarily mean every partner sees the data," explains Kefer.

Large OEMs are using the cloud to make it easier for small partners to collaborate in a supply network. PC manufacturer Lenovo, for example, uses a cloud-based solution from E2open to reduce partner on-boarding time as well as cost. It also uses the cloud for its procurement system.

"One of [Lenovo's] key challenges was to increase control and transparency of purchasing costs associated with strategic components, while continuing to reap the efficiency and risk mitigation benefits of outsourcing," according to a recent case study published in conjunction with E2open. By leveraging the cloud, Lenovo now has direct control of strategic components purchasing regardless of where its PCs are manufactured. Procurement is managed through a single hub in Hong Kong.

Specifically, Lenovo's Hong Kong procurement solution provides:

• Complete automation and tracking of the order-to-cash and procure-to-pay processes
• Elimination of the need for manual touches and data aggregation
• Support for discrete orders and blanket orders/scheduling agreements
• Purchase order (PO) collaboration between Lenovo and its suppliers and contract manufacturers
• Confidential pricing agreements with key suppliers

The system also provides support for Lenovo's global service network, enabling post-sale, warranty, and service providers to purchase their materials at lower, pre-negotiated prices. To date, Lenovo's solution has yielded the following benefits:

• Improved cash conversion cycle
• Strengthened market competitiveness through reduced purchasing costs of core commodities
• Improved supply assurance and supply allocation abilities
• Cycle time on supplier responses reduced from hours to minutes

The cloud itself is not a solution to all supply chain problems: Experts cite security concerns among the cloud's shortcomings. As a tool, though, the cloud could provide endless opportunities for innovation.

According to a recent Accenture article:

Cloud computing promises to enable a wide and powerful range of capabilities; yet its potential uses are exceptionally broad and difficult to foretell. What is certain is that -- in the years to come -- it will radically reshape how computing power is sourced and managed, how information is controlled, and the economics of supply chain information technology.