How Cloud Computing Supports the Supply Chain

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Companies around the world are focused on the supply chain and how easily it can be disrupted. This web of human and material resources requires careful management, real-time data, and even predictive capabilities to handle the complexities of modern commerce.

The cloud has been gaining popularity throughout every industry for the last several years. In broad terms, cloud computing provides data mobility and analysis, typically using remote servers rather than on-premises computational infrastructure.

What are the advantages of adopting cloud computing applications in the supply chain?

What Does Supply Chain Cloud Computing Look Like?

Before studying the benefits, it’s worth understanding the supply chain cloud computing business model in more detail.

The primary advantage of cloud computing technology is the ability to leverage remote servers owned by cloud providers or data-storage companies. Companies everywhere, including supply chain entities, collect substantial amounts of data on a daily basis. They don’t always have the resources, infrastructure, and talent to properly capitalize on that data, however.

Currently, one of the chief barriers to companies adopting cloud computing is a lack of adequately trained staff. Yet cloud vendors can help with this financial, cultural, and practical burden. In other words, they offer the expertise in building and securing cloud environments, rather than an in-house team without the latest credentials and experience.

There are three major configurations for cloud computing services that support supply chains:

  • Software-as-a-service (SaaS) is where supply-chain companies utilize applications or web apps designed, hosted, and maintained by a third party. Email services are basic examples. Advanced enterprise-resource planning software is a more complex one.
  • Infrastructure-as-a-service (IaaS) is another business model through which logistics and supply-chain companies adopt cloud-based data-management and data-analysis technologies. This infrastructure might include internet of things (IoT sensors), virtual machines, networking technology, and energy-management infrastructure.
  • Platform-as-a-service (PasS) is useful in cases where app developers need a stable, cloud-based development environment in which to test cloud services — and especially to test them for cross-compatibility with existing products and APIs (application programming interfaces). This is useful in supply-chain management, where partners may use a panoply of products from various vendors.

No matter which management and enterprise-planning workflows companies select to operate in cloud environments, such activities may take place on private clouds or public clouds. A combination of these is known as a hybrid cloud model.

Here are some of the main use cases for cloud computing across the supply chain.

Managing Logistics

Maintaining a responsive and effective supply chain requires a strong grasp of logistical efficiency. While human beings once managed each discrete detail in logistics, cloud computing and big-data analysis now provide manifold opportunities to streamline or automate some of the most important logistical tasks within the supply chain.

Here are just some of the logistics-related management capabilities provided by cloud data and computing:

  • Managing the movement and allocation of trucks and other vehicles.
  • Sequencing and prioritizing new orders.
  • Automatically generating or updating supply or shipping routes to eliminate delays.
  • Automatically filling out compliance documents, invoices, receipts, and more.

The deployment of cloud technologies provides the ability for various departments and stakeholders to compare and combine data to create more synergistic workflows and collaborate more effectively.

Automating Inventory Management

For a while, the order of the day in logistics and supply-chain management was “just in time” production and shipping. The lingering coronavirus pandemic turned this axiom on its head. Today, manufacturers and distributors maintain a “just in case” mentality to ensure critical goods are available in the required quantities at all times.

During the peak of the pandemic, respondents to a Bureau of Labor Statistics (BLS) survey said they’d experienced critical material shortages. Within certain sectors like healthcare, retail, and foodservice, the number of affected businesses rises to 64%, 59%, and 50%, respectively.

This makes the smooth management of product inventories absolutely critical. Ideally, supply-chain entities should be adopting technologies that automate inventory management as much as possible. Cloud computing makes this possible through technologies like Internet of things (IoT) sensors, which an identify critically low inventory levels in warehouse stow locations or retail stores.

A use care: representatives from outdoor-equipment brand REI worked with IBM on a cloud computing system recently. The system was designed to provide real-time inventory management across the company’s vast physical footprint. The company describes the results from their newly adopted cloud deployment as “immediate” and “game-changing.”

Making Future Plans and Predictions

Forecasting and making predictions for what the future may hold is one of the most important functions within supply-chain management. The ability to anticipate future sales enables the ability to alter processes and scale departments to ensure supply matches demand.

Cloud computing is essential for effective enterprise planning and logistical forecasting. The cloud collects and organizes data from disparate sources to create a more full awareness of current and future situations. These sources might include:

  • Customer service channels.
  • Online sales portals.
  • Retail locations.
  • Wholesale suppliers.

With the cloud unifying these data streams, logistics professionals can engage in deep analysis and make accurate forecasts for the future based on current trends.

Cloud-based data analysis is the reason major pharmaceutical companies like Bayer are able to keep critical and seasonal medications in stock reliably throughout the country year-round. The right technologies can provide several months of forecasting and prediction data to keep ahead of seasonal surges and even unpredictable changes in local demand patterns.

Improving Procurement and Sourcing

Some companies must maintain relationships with hundreds or thousands of providers of finished goods or raw materials. Cloud computing provides the means to digitize the sourcing and procurement processes. The potential benefits include:

  • Facilitates faster communication between partners.
  • Provides a single source of truth to eliminate errors and unnecessary purchases.
  • Provides the potential to automate vendor changeovers based on current supplies.
  • Automatically generates invoices, custody documents, and databases for traceability compliance.

Accessibility is the name of the game here: accessibility, via the cloud, of all the documentation and ongoing data-gathering that makes for a harmonious supply-chain ecosystem. Supply-chain coordination and financing can be complex beasts — and some companies might need the speed, efficiency, and organization the cloud provides to enable reverse factoring and other types of cash-flow-boosting financing options.

Managing Maintenance and Equipment Breakdowns

One of the more popular infrastructure-as-a-service product types involves the automation of maintenance tasks.

Cloud computing gives supply-chain companies the ability to unite their physical infrastructure in a cloud-based maintenance dashboard. This includes building systems, material-handling mechanisms like conveyors and pallet trucks, and energy or water systems.

Across all sectors, the average cost per hour for machine downtime sits around $260,000. Depending on the time of day and year, that cost could be higher. Cloud maintenance platforms using hardware sensors and software intelligence constantly monitor mechanical assets for leaks, pressure drops, and temperature or vibration anomalies.

Examples abound – in pipe and tire manufacturing, the chemical industry, and throughout the supply chain – of technology adopters boosting the ROI for their machines. This is an important advantage given their expense. An additional benefit: eliminating product defects that result from faulty or failing equipment.

Why Adopt the Cloud Across the Supply Chain?

There is a reason why IaaS and PaaS are growing at a rapid rate: this family of technologies has the potential to add significant value to any supply-chain organization.

Interested CEOs, CTOs, and entrepreneurs enjoy the automation, real-time intelligence, scalability, speed, and resource-efficiency that cloud computing provides. When it’s at its best, the cloud is a tool that allows humans to spend their time on creative and innovative work rather than babysitting mundane, repetitive processes. With the cloud, supply-chain companies and others can build something better and deliver the best service possible.

Devin Partida
Devin Partida
Devin Partida is a contributing writer for Enterprise Networking Planet who writes about business technology, cybersecurity, and innovation. Her work has been featured on Yahoo! Finance, Entrepreneur, Startups Magazine, and many other industry publications. She is also the Editor-in-Chief of ReHack.
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