Never mind the naysayers: Del Monte Foods is a big believer in cloud technology. In just three years, the $3.7bn company has placed its entire inbound supply chain in the cloud. The result, according to senior manager of global trade compliance Brian White, has been tighter relationships with suppliers, and greater visibility of product in the pipeline.
Del Monte's revenues are matched by the complexity of its organization. The company's product line divides into 49 percent consumer items and 51 percent pet food. It manages more than 3,500 inputs from growers, with 17 U.S. production facilities, 24 devoted to co-packing, 11 distribution centers and more than 550 ship-to locations, White said. On the international side, it operates 20 co-packing locations and imports the equivalent of more than 11,000 twenty-foot containers (TEUs) from 48 destinations.
Speaking at a recent meeting of the San Francisco Roundtable of the Council of Supply Chain Management Professionals, White laid out the details of Del Monte's cloud-based network.
Over the years, Del Monte has forged an effective supply chain with the help of multiple IT vendors: Siebel (now part of Oracle Corp.) for customer relationship management, i2 Technologies (now part of JDA Software Group) for planning, Transplace for transportation and logistics management, and GT Nexus for a collaboration platform that links it with trading and service partners.
Putting those pieces together is never easy. According to White, it takes the cloud to enable a single system that gives Del Monte visibility across its entire network. Through a series of interconnected modules hosted by providers, it can access demand signals, create order and shipment plans, contract with suppliers, confirm shipments, control inventory, generate invoices and handle discrepancies, all through one cohesive platform. And Del Monte doesn't have to manage multiple software applications within its own servers.
Del Monte also relies on the cloud for gathering data that's essential to complying with regulations such as the Importer Security Filing rules of U.S. Customs and Border Protection. The system validates whether the information is accurate for ISF purposes, then sends it directly to Customs via the GT Nexus platform.
The result, said White, is "enhanced internal controls. We're leveraging purchase-order data throughout the import lifecycle." Benefits include a 56-percent savings in customs broker costs and 26-percent reduction in inventory due to better in-transit visibility.
Concerns about security have kept many companies from adopting software systems in the cloud, but not Del Monte. In fact, White believes that sending information via a cloud-based network is more secure than in the old days of legacy applications and faxes. Back then, "you didn't know where they were, and who got them."
At the same time, companies need to take steps to secure their data no matter how it's flowing between trading partners. "The cloud doesn't get a free pass," said GT Nexus chief marketing officer Greg Johnsen, another speaker at the S.F. Roundtable dinner. "IT professionals are not afraid of the cloud, but you've got to do your due diligence."
Johnsen said cloud-based applications can help to uncover the link between better visibility and reduced inventory. Companies tend to build safety stocks based on multiple inputs. Old-style systems would result in longer and more variable lead times, with redundant inventory taking the place of real-time information. Through better understanding of those key inputs, Del Monte has been able to slice four days out of inbound transit times, with commensurate reductions in inventory, said White.
Johnsen believes the cloud can be a better environment for rounding up all of the disparate information from a company's service partners - 80 percent of the total data required, in a typical supply chain.
To my mind, early reluctance to accept the cloud was due to legitimate concerns about data security and vendor stability. Others say it stemmed more from a natural tendency to oppose technological change. Siamak Farah, chief executive officer of InfoStreet, likens the situation to several decades ago, when new manufacturing and supply-chain software was just hitting the market.
"People were asking whether it was real or not," he says. "Nevertheless, these software applications have made everybody more efficient." Instead of fearing change, he suggests, companies should be embracing innovation, which is more crucial than ever in a time of shrinking product lifecycles.
"In my humble opinion," says Farah, "the cloud is here to stay." As for the word itself, it's indicative of any developing technology that "goes from geekdom into the layman's language."
Farah believes the cloud is even more applicable to the supply-chain realm than many other areas of business management. The very nature of the discipline involves data flowing from many sources, often in different languages and with varying levels of technological sophistication. They can all be unified in a cloud environment, he says.
Even IT experts judge the cloud to be more suitable for some areas than others. Some manages argue that internally focused functions such as warehouse management are better off with their systems located on the premises. Farah says it depends on factors like the size and number of distribution centers. A large company might have a chain of facilities that lends itself to a cloud-based network. A stand-alone operation with relatively basic inventory processes would be more inclined to house its software on site.
Similarly, enterprise resource planning systems, one of the last applications to be placed in the cloud, shouldn't automatically be taken off site if a company has already spent millions of dollars on a client/server configuration. "If you're thinking longer term, then yes," says Farah. "If shorter term, it's debatable."
Still, Farah thinks that just about any company that wants to remain competitive will have to follow Del Monte's example. "My belief is that if they don't eventually go in that direction, they will be falling behind. So the sooner the better."
At least until software marketers come up with another snappy label - and we all wait for their applications to justify the hype.
- Robert J. Bowman, SupplyChainBrain
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