Cloud = Web Software? In Supply Chain, That’s the Wrong Answer

Takeaways:

  • Cloud technology is helping companies do things that are simply not possible with traditional software
  • Cloud supply chain creates an informational replica of the actual physical supply chain
  • The supply chain is a network. The right information model must be network-based

Recently, I attended the CSCMP global conference and heard something that reflects a common misunderstanding about cloud technology. It made me realize why the market has a long way to go before we see mass adoption and the end of traditional license-and-install software in the supply chain space.

My company was chairing the event’s “Emerging Technology” track, and we had developed a two-day program that was heavily tilted towards explaining cloud and its potential in the global supply chain arena. Clearly the issue is hot—we had a large, standing room only audience.

At one point during the Q&A, a gentleman stood up to ask a question, and started something like this: “OK, I totally get this whole cloud thing…it’s all about using my software applications through a Web browser...” I couldn’t stop thinking about how this guy, like so many others, thinks he has cloud figured out, while in reality his view of cloud only hits on about 10 percent of the opportunity it holds in supply chain.

Yes, cloud does mean you can use software applications through a standard Web browser, but that is just the tip of the iceberg. In supply chain, cloud technology is helping companies do things that are simply not possible with traditional software. It’s not because companies haven’t tried to apply software solutions to their supply chains. It’s not actually even a software problem. The problem has always been about how companies and partners connect, collaborate and share information. This is where there is still heavy confusion in the market.

A lot of the blame can be placed on the vendor community for confusing everyone. Almost every technology company has jumped on the cloud bandwagon. The big established software companies will gladly sell you their software as a Web (or cloud) service and host it. It would still be your own private solution but would live on a server offsite with the vendor. So, while there are some nice IT economic advantages to this approach, it doesn’t really address the issue that has plagued supply chain technology for several decades.

The Holy Grail

The missing link in supply chain management is not a software problem. This key issue is about automating processes that happen between companies and their partners. It also means dealing with partners that are scattered all over the world. Each supply chain constituent typically has pieces of information that other companies need to run their supply chains, but getting the right information at the right time has always been the key challenge.

How do you connect a large global network of partners and get all of that valuable supply chain information into a single location, in a common format, in real time that everybody can see and act upon? Sometimes, this is referred to as the “single version of truth,” or the “Holy Grail” of supply chain management. This is where cloud supply chain is making its impact.

Cloud supply chain creates an informational replica of the actual physical supply chain, capturing every movement, event, document, and information element across global partner communities. Everyone looks at the same standard set of information. If the state of one element changes, everybody sees it as it happens. Related objects also are linked in the cloud, meaning orders are connected to related shipments, which are connected to related documents, which are connected to related partners, which might also interact with an ERP or TMS system back at the enterprise. Supply chain is a network. The right information model must be network-based.

Multi-tenancy

What makes this possible is the notion of multi-tenancy. From a pure software application perspective, this means multiple companies share the same instance of software and the exact same line of code. This is very common with cloud technology. Salesforce.com is like this. The multi-tenant software model enables the vendor to maintain a vastly superior solution for its customers, because they are focused on one single version of their product. They can make updates and improvements several times a year.

Customers can focus on their business processes, not running or maintaining the software. This is also very much NOT the example described above, where a technology vendor hosts a custom version of its software for each specific customer.

Cloud supply chain takes the multi-tenancy concept a step further and applies it to the information network that connects partners. Here, multiple companies share the same network of integrations, data standards and information types. This is huge in supply chain because companies often have common partners, like carriers and 3PLs. Once a partner is “on” the network, they are pre-tooled to support the next companies that adopt the cloud platform. As more companies and partners get on the platform you’ll see a scenario where an entire industry is on the same information page.

Cloud supply chain relieves companies of the daunting task of building their own networks, connecting their partners, mapping the data, and then maintaining the platform on an ongoing basis. Instead, they use a platform that is maintained by a vendor and subsidized by a large community of participants. Like an electric power utility, the participants get access to a multi-billion-dollar electric grid, but only pay a few hundred dollars per month.

In supply chain, where few companies have the ability to instantly locate the status of an order or related shipment in a matter of seconds, cloud is already changing the way companies operate. Suddenly the notion of true agile operations is not a pipe dream, but a reality because now companies do have the ability to see and respond in real time to the events that take place on the other side of the world.

The math is abundantly clear. The supply chain industry is huge and won’t change overnight. And, I’m probably being a little hard on that poor guy who asked the cloud question at CSCMP. After all, he did know a little about cloud math…Cloud = Good. As the network information model part of the supply chain equation becomes clear, cloud will change forever the way supply chains are managed.

About the Author: Greg Kefer is Director, Corporate Marketing, at GT Nexus in Oakland, Calif. GT Nexus provides a cloud-based collaboration platform to automate hundreds of supply chain processes on a global scale, across entire trade communities. For information, visit www.gtnexus.com.

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