Think Tank

A Journey to the Cloud Enables the Push to a Digital Supply Chain

For some companies, going to the cloud means more than simply changing the address of their servers.

At Schneider Electric, the global purveyor of energy management and industrial automation systems, the cloud presented an opportunity to undertake a wholesale digital transformation of its supply chain.

Stuart Whiting, who today serves as Schneider Electric’s senior vice president for logistics and network design, arrived at the company five years ago. At the time, it was operating across a platform of approximately 125 enterprise resource planning (ERP) systems, 30 warehouse-management systems (WMS) and a smattering of transportation-management systems (TMS).

While consolidating that mishmash of software was an obvious goal, paring down the diverse architecture to what Whiting terms “a federation of core ERPs” wasn’t the top priority. The first task was to address middleware. Schneider Electric needed a coherent messaging platform that could ensure the quality of data moving across the supply chain in a connected fashion.

“We realized that on-premise and traditional platforms were expensive to maintain and update,” Whiting says. “We wanted to freely share and exchange data to become more agile and responsive, and get visibility to what was happening upstream and downstream with supply and demand.”

For Schneider Electric, migrating its information systems to the cloud was key to creation of a global “eco-structure” that enabled the exchange of information across the end-to-end supply chain.

Whiting says it was essential that the company be able to trust the integrity of that data. Only then could it make effective use of both predictive and prescriptive analytics. It’s the latter functionality that’s the Holy Grail of today’s number crunchers, with the ability to turn a forecast into an action plan.

Virtually every kind of business software has rushed to the cloud over the last decade or so, but Schneider Electric was determined to take a measured and thoughtful approach to its own initiative. Certain areas of the company that are deemed especially sensitive, including personnel, pricing and product research and development, would continue to supported by on-premise servers. But that has left plenty of systems that can comfortably reside outside corporate walls, allowing Schneider Electric to reap the natural benefits of cloud technology, including lower maintenance costs and the avoidance of disruptions caused by regular software upgrades. When it comes to the many elements of a complex supply chain, Whiting says, determining which systems should be housed on-premise and which should be decentralized is “a classic culture challenge.”

The company is taking equal care in phasing in the “orchestration” of its supply chain in the cloud. It has adopted a staggered approach to shifting systems off-premise. Whiting describes it as a journey — one that involves “an incredible amount of learning and adjustment within the organization.”

The company’s array of WMS software presents a particular challenge. Whiting says the logistics function had been operating in a decentralized fashion, to the point where each country manager “had its own fiefdoms.” As part of the cloud initiative, Schneider Electric set out to standardize the way it ran the distribution-center network.

Much of the effort toward digitization has been aimed at the supplier base. For the transportation function alone, Schneider Electric had some 1,450 suppliers. That has since been pared back to around 280, although the company directly manages only 16. They consist largely of logistics service providers, whose job it is to oversee the remaining 264 vendors.

The invention of the cloud is, if course, a triumph of technology. Yet no initiative on the scale of Schneider Electric’s can succeed without equal attention being paid to the human element. Whiting says it was essential to engage in intensive change management, to ensure that the technology tools were deployed to their full potential.

Overlooking that critical need can result in miscommunication, inefficiencies and even the loss of valued staff. “Talent is not a readily available commodity,” Whiting says. “It’s high in demand and short in supply.” To address the issue of employee retention, Schneider Electric has worked hard to assemble “a good pool of people who are innovative and love to run scenarios, and take advantage of the opportunities that are presented to them.”

Whiting expects to take the rest of the year to fully assess the scope of Schneider Electric’s cloud initiative. Other innovations could be in the offing, including the use of blockchain technology for further cementing links with both suppliers and customers. Currently the company is engaged in active blockchain trials with Dutch and U.S. customs, shipping lines and a lead logistics provider.

“We’ll continue to build year on year as we learn,” says Whiting. “Each year we accelerate with knowledge and expertise, as we get more and more familiar with the tools.”

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