It's easy to see what is fueling this incredible growth. For many companies, off-site clouds simplify their everyday IT decisions and maintenance issues. Technology hosting, 24-7 system availability, secure data storage and other practical considerations can be easily delegated to a new cloud team, charged with managing daily technology and data management.
Yet the real value of cloud computing does not lie in bottom-line cost savings achieved through off-site data storage, infrastructure and maintenance - but in the top-line strategic value that the cloud can deliver to the entire business. Today, many companies are failing to realize the full value of their cloud investments to help them manage demand volatility, price pressures, supply uncertainty and other critical supply chain issues. The real value lies in the capability that the cloud can deliver - not just its numeric capacity.
Accelerating Business Transformation
While cloud technology offers many stand-alone benefits, true business transformation occurs when cloud computing is combined with leading-edge supply chain solutions to advance the top-level strategic direction of the business. This is the difference between a strictly transactional cloud and one that represents a truly transformational capability.
Before making significant cloud investments, executives should ask, "What are our key strategic challenges - and how can we best leverage technology to overcome them?" Whether executives realize it or not, cloud resources can be optimized to create dramatic improvements in these and other critical business areas:
• Revenue maximization. Cloud computing can help forge stronger, more collaborative partnerships among manufacturers, retailers, distributors, suppliers and other participants in the global network. Not only can the cloud provide technology linkages among organizations, but it contains all the data needed to raise the performance of every partner in delivering products to the marketplace.
• Inventory optimization. An information-rich cloud can help ensure that inventory is deployed in the most strategic way across the entire multi-echelon supply chain, down to the individual shelf level. By matching inventory to true demand signals, customer service levels and profitability can both be maximized. Safety stock management can be based on segmentation, combining the highest possible customer satisfaction levels with margin optimization.
• Forecasting accuracy. Using the full power of cloud technologies, companies can align their forecasts with true, real-time demand signals from the marketplace, making agile adjustments as needed. The right forecasting algorithms and logic can be used for each product category, and stock-keeping units (SKUs) can be mapped to maximize forecast granularity and help shape demand.
• Demand and fulfillment optimization. Cloud resources can support master planning processes in which supply and demand are carefully balanced, with both service levels and profitability in mind. When supply-and-demand mismatches occur, root-cause analysis helps re-align resources and business processes to maximize accuracy moving forward.
• Business-wide synchronization. The cloud makes end-to-end supply chain information visible, enabling integrated planning across the organization. Short-term performance goals can be considered alongside the longer-term objectives of the entire supply network. Functional siloes and disparate planning processes are eliminated, as the entire business focuses on the same data and shared performance goals.
It's true that many of these benefits can be achieved through a traditional, on-premise implementation of advanced supply chain software. However, by leveraging these capabilities in a cloud environment, companies can achieve these results more quickly and accurately - all with a lower capital investment.
To obtain this level of high-impact transformation from cloud investments, top-level strategy should serve as the starting point. Executives first need to focus on key business objectives such as "How can we better manage our demand volatility?" or "How can we build more effective supplier partnerships to increase our agility?" Then cloud resources can be configured and deployed to answer those pressing strategic needs in the most cost-efficient and rapid manner.
Leading in the Cloud
Today, a handful of supply chain leaders are demonstrating the full potential of cloud computing to quickly transform the end-to-end supply chain.
Recently, a leading U.S. specialty retailer leveraged cloud resources to drive an 18-month rolling forecast for more than 425 demand forecasting units. By relying on a cloud approach, advanced supply chain software was deployed in pilot stores in under three hours. Today, real-time sales data is used to review and fine-tune forecasts on a daily basis, enabling optimal inventory positioning - and creating an environment of continuous learning and improvement. As new products and store locations are added, they can easily be incorporated into the agile, flexible cloud structure. This retailer has supplemented its on-site planning capability by using a new cloud model.
An industrial manufacturer applied cloud resources to reduce its master planning process from one week to one day, driving out both time and costs. New real-time information availability means this company can track work-in-process more closely across its global supply chain, as well as reserve capacity with key suppliers when high demand periods are projected. Both supply and demand are segmented and prioritized, so that service levels are balanced with profitability goals. The end-to-end supply chain is much more agile, able to make rapid operations adjustments when key performance indicators show that corrective action is needed.
In today's uncertain economy, automotive manufacturers face especially high levels of demand volatility. An automaker managed this variability by using cloud resources to install new planning processes that monitor performance - and adjust operations - on a continuous basis, at a minimal investment. Reports are generated automatically so that performance can be reviewed on a daily basis. What-if analysis helps the automaker test the results of any actions before they are undertaken. Because of this company's strategic application of cloud resources, customer service levels are up while safety stock levels are down.
A Holistic Approach
Any real business transformation is a complex process - and it's important to recognize that cloud technology is just one piece of the puzzle. In today's fast-paced business world, however, it is emerging as a more and more critical piece.
For companies seeking rapid transformation and long-term supply chain leadership, cloud resources are an essential mechanism that delivers the right technology, people and processes to quickly revolutionize the entire business. When paired with best-of-breed supply chain solutions, a well-planned cloud deployment can lower a company's upfront costs while minimizing risk, driving immediate bottom-line savings and reducing the time it takes to achieve a full return on investment.
While cloud technology is gaining new levels of acceptance in the market, it is not new. In fact, many of the solution providers that are driving these transformative business results have been doing so for 10 to 15 years, with thousands of implementations under their belts. In order to maximize cloud investments, it is crucial to choose a partner with years of firsthand experience in delivering high-impact, business-wide results. Most cloud projects today return thousands of dollars in efficiency savings, but when the cloud is linked to top-level strategy that return can jump to millions of dollars - and an optimized supply chain that positions the business for long-term success.
Cloud technology initiatives should never be undertaken in a vacuum, but instead should be considered just one part of an overall strategic supply chain engagement. Companies can realize the highest possible benefit by combining their cloud investments with a high-level strategy assessment, ongoing support services and continuous technology upgrades that ensure their cloud continues to deliver the greatest possible performance over time. While cloud providers are proliferating at a rapid pace, few combine technology expertise with true supply chain insight and top-level business expertise. This explains why, for some companies rushing into the cloud, their results will ultimately fall short - because their cloud investments are siloed and not linked to the overall goals of the business.
If the projections about the enormous growth of cloud computing hold true, we will look back in 10 years and see a range of results from these early years of cloud adoption. What will separate the leaders from the followers is focusing on critical strategic goals before leaping headlong into a cloud environment. As the buzz grows, it's essential to recognize that the cloud is not an end in itself, but merely a faster, more cost-effective means to achieve the larger strategic objectives you're already pursuing.
Keywords: supply chain solutions, supply chain systems, inventory control, supply chain management IT, value chain IT, cloud computing in the supply chain
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