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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.

10 comments on “Cloud Can Unlock Supply Chain Innovations

  1. _hm
    September 13, 2012

    This is a very good concept. But it may not suit many type of businesses and models. Also, there is substaintial risk associated with it. Many organization will wait and watch until it matures.

     

  2. gary.meyers
    September 13, 2012

    Barbara, I enjoyed your article.  You're so right – the cloud provides limitless opportunities for innovation in the supply chain.  My company, FusionOps, for example, is focused on cloud-based supply chain analytics.  Before we begin a customer trial, we almost always need to address security concerns, but that has never been a limitation in moving forward.  CIOs are becoming increasingly comfortable with secure cloud computing technologies.  It began in the CRM (salesforce.com) function, but has moved to HR (workday), storage (dropbox and box), marketing (marketo), and so on.  More and more of what used to be on-premise in the enterprise is disrupting to the cloud.

    By moving supply chain analytics to the cloud, we've eliminated all of the cap-ex associated with expensive BI tools.  We take it a step further with over 700 pre-built reports and dashboards that we make available in a single day for SAP customers – in areas from procurement to production planning, quality, supplier performance, MRP, inventory, and more – that minimizes the burden on IT departments.  Check us out at http://www.fusionops.com.

  3. FLYINGSCOT
    September 14, 2012

    Interesting to note Gary.Meyers saying security is a concern that is readily overcome.  If this is the case then I agree cloud based systems offer great opportunities.  I will check out Gary's website and thanks for the post.

  4. bolaji ojo
    September 14, 2012

    Barbara, Is it possible that the cloud is overpromising? The expectations are high for savings and efficiency improvements. In order for the expectations to be met, though, both the firms interested in the cloud and the technology have to match. Do you see situations where this hasn't been the case? What should companies do to get the best benefits of the cloud?

  5. Barbara Jorgensen
    September 14, 2012

    @gary: it's good to hear that companies are starting with security and then implementing functions, rather than vice-versa. I'm afraid I don't know enough about the cloud to comment on security beyond that. Question: wasn't Apple's cloud breached recently? Do you have any insight into how/why that happened?

  6. Barbara Jorgensen
    September 14, 2012

    @Bolaji: I remain among the skeptics that think the cloud is over-hyped, at least for the electronics supply chain. Let me drill that down further to say on the supply chain transactional level. The cloud has unlimited potential as a data-gathering and collaboration tool. But when it comes down to actually sending or receiving and order; a BOM or other data, I still think the legacy systems in the supply chain still have a lot of capacity for improvement and haven't yet amortized the investment in the systems. If nothing else, they'll be used until they reach the end of their useful life.

  7. SP
    September 14, 2012

    Definitely cloud computing can unlock supply chain innovations. I think its a great idea. You can share so much. Cost comes down and information is available without much delays. I guess many companies might already be using this in their supply chains.

  8. gary.meyers
    September 14, 2012

    I believe the incident you're referring to occurred in early August when a hacker was able to get into a user's iCloud account by tricking Apple's tech support.  The hacker then deleted the user's data on his Apple devices.  This is an example of why enterprises take security so seriously, and why they put policies in place to prevent unauthorized access both within their own firewall and externally on the cloud.  Our company hosts at Rackspace, for example, and they comply with the “SAS70, Type 2 (now called SSAE 16)” auditing standard which entails many layers of security.  Rackspace claims 190,000 customers – so the fact that we haven't heard more about cloud security breaches is a testament to the work that's been done to prevent unauthorized access.  I don't think we'll see the end of security breaches (we've seen them at the CIA too – recall the February attack on the CIA website); the goal with the cloud, however, is to make it as or more secure than that contained within the enterprise.  

    Interesting to note the disparity between young companies that run nearly all processes on the web and more established companies that are just getting comfortable with it.  Young people have grown up with Gmail and Facebook; they can't imagine not using the cloud for their enterprise systems (check out the growth of Netsuite, for example). 

  9. Barbara Jorgensen
    September 14, 2012

    Thanks Gary. So it was more a case of “anyone is vulnerable” rather than it just being based in the cloud. For every platform there will be a hacker. It happens.

  10. Taimoor Zubar
    September 15, 2012

    I think cloud is a very generic term and there are various domains under it. The primary domain that's relevant to the manufacturing sector within the cloud may be the use of SaaS (Software as a Service). This is where the manufacturers can use a cloud-based system for their business processes and there's no need to have an in-house solution. This has it's own merits and demerits but the main factor is that there's very little upfront cost with SaaS.

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