Cloud Computing Enhances Supply Chain Logistics Capabilities

Learn how cloud computing is being used by businesses to foster efficient logistics and supply chain operations

To be successful, businesses must get products or services to customers faster and cheaper. However, geo-political turmoil, environmental challenges, and shutdowns from COVID-19 are still causing volatility in the world’s supply chains. As the number of partners and suppliers required to manufacture products and get them to customers continues to grow, the demand for more effective models of capturing, delivering, and storing data continues to rise.

Therefore, businesses are constantly looking for ways to improve their operations and gain advantages over competitors. To do so, businesses must be able to store and share data across their entire network. Given the importance of storing and communicating data, supply chain managers and information technology professionals are implementing cloud computing as a solution.

What is Cloud Computing?

Cloud computing is essentially the delivery of computing services over the internet. Services can include:

Servers & software
Data storage & database management
Networking, analytics, and intelligence

Cloud Computing in The Supply Chain

The fast-moving pace of economic markets necessitates that businesses communicate and share data quickly, accurately, and efficiently. However, traditional supply chain networks are often fragmented, making it difficult to share information with business partners. To combat this, businesses are digitalizing processes. This enables them increased visibility across each stage of a product’s life cycle in real time. For many businesses, being able to track and trace products, shipments, and orders is not enough. Therefore, with the help of cloud computing technologies businesses can visualize each business process, from production through delivery to the end customer and much more. Read on to explore some of the ways businesses are utilizing cloud computing to enhance their business operations.

The Value of The Cloud

Often referred to as “the cloud”, cloud computing comprises various models. Cloud models such as the Software as a Service deliver cloud solutions as a pay-as-you-go service. Many experts refer to the pay-as-you-go model as utility computing. So, because cloud services typically are used on a pay-as-you-go basis, businesses can reduce capital expenditures by using only the services that they need and not building out costly infrastructure. This also means that cloud providers can match their price with the potential performance their service brings to a business.

Major cloud providers like Microsoft invest billions of dollars per year in new cloud features and applications. This offers businesses access to advanced technologies and capabilities priced within their means.

The cloud drives business performance by enhancing the speed, agility, scalability, and visibility of a business across its entire supply chain. With cloud computing, businesses reap benefits such as access to advanced computing infrastructure and an increased ability to scale their business in real time.

In a recent study, saving money was the top reason that businesses migrated their supply chain to the cloud. However, cloud computing offers much more to a business than cost-effectiveness.

The cloud:

Has the capability to integrate companies with the rest of the world

Helps companies swiftly adjust computing resources

Reduces time and cost to develop and deploy new applications

Enables enhanced visibility for faster and more informed decisions

These aspects let businesses extend beyond their current needs to predict market changes and mitigate potential risks across the supply chain. Therefore, businesses that can mitigate disruptions can make sure that products and services are delivered quickly and efficiently, leading to improved customer experience and customer satisfaction.

Many cloud-based solutions are constructed from the ground up. As a result, they are extremely configurable. Therefore, businesses can communicate with diverse trade and supply networks across the value chain, regardless of other businesses system capabilities. This enables direct connectivity between business partners. So, businesses can more readily:

Facilitate track and trace of shipments
Streamline routine transactional workflow
Enable high level analyst reports and data control
Accelerate communication with global trade partners
Optimize the flow of equipment to boost asset utilization

Datex Fast Facts

21% of supply chain executives have deployed cloud capabilities across their entire supply chain

41% of all supply chain executives said the desire to increase efficiency was one of the top three reasons for cloud migration

Supply chain executives attribute cloud use to a:

26% increase in demand forecast accuracy

16% reduction in operating costs

5% increase in growth and profitability

Cloud-based Supply Chain Transformation | Accenture

Types of Cloud Computing Models

Infrastructure as a Service (IaaS)

Infrastructure as a Service cloud computing models contain the basic building blocks for cloud information technology (IT). The IaaS model not only enables access to networking features but also data storage and networking space. Additionally, IaaS is useful because it offers a high level of flexibility and control over IT resources.

IaaS can include:

Internet of Things (IoT) sensors
Virtual servers and virtual machines
Networking technology
Energy management infrastructure

Datex Fast Fact

A virtual machine is a virtualized instance of a computer that can perform almost all of the same functions as a computer, including running applications and operating systems.

Platform as a Service (PaaS)

Platform as a Service cloud models are useful when businesses need a stable, development platform in a cloud-based environment to test cloud services. This can be useful when businesses or application developers need to test applications for cross-compatibility with existing products. Being able to partner with businesses that utilize different cloud vendors and multiple clouds can create a competitive advantage and provide added flexibility. This is useful in supply chain management because it removes the need for businesses to manage underlying infrastructure such as hardware and operating systems.

Software as a Service (SaaS)

Software as a Service cloud computing models are typically web applications designed, hosted, and managed by a third party such as software development companies Amazon or Microsoft. In fact, Microsoft’s Azure is one of the most popular SaaS utilized by third party logistics providers (3PLs) and shippers. With SaaS, businesses only need to worry about database migration and how the software will be implemented and utilized.

Email services that focus on content delivery are a basic example of a SaaS, however applications such as drayage dispatch and transportation management are widely utilized.

For example, automated dispatch management systems are being utilized to link ocean carriers and 3PLs. The system, which can be utilized through a mobile app or virtual desktop, communicates critical pick-up and delivery data in real time that can:

Reduce transportation costs
Manage container equipment
Shift business to the most efficient vendors
Track equipment as it moves through the supply chain
Automate manual tasks eliminating costly billing errors
Increase equipment utilization by combining freight moves

Cloud Computing Deployment Models

Cloud-Based Deployment

Many experts feel that cloud-based deployment has become essential to supply chain logistics for three reasons.

Low upfront capital required for software
Enhanced cloud security
Existing cloud infrastructure

Cloud-based deployment is typically associated with SaaS. Normally, SaaS applications have been created in the cloud or have been migrated to the cloud from an existing physical server to take advantage of benefits such as access to a global infrastructure. So, SaaS applications can be made available via a web browser or mobile app built and maintained by a cloud service provider. Therefore, IT operations, monitoring, management, maintenance, and upgrade of the platform are performed by the SaaS provider. Additionally, SaaS solutions can be quickly deployed because they do not require hardware and software purchases for on-premises deployments.

Cloud Computing and Hybrid Deployment

Hybrid cloud deployment connects the infrastructure and applications of cloud-based resources and existing resources that are not located in the cloud. Hybrid deployment can be used to extend a business’s infrastructure into the cloud while simultaneously connecting cloud resources to internal systems. One application that utilizes hybrid deployment is automation of maintenance and repairs apps. This enables users to readily connect with a dedicated network of equipment maintenance and repair providers. In addition, the application can include maintenance features for business infrastructure such as:

Building systems
Material-handling machines like automated carousels and conveyors
Energy and water systems

Research shows that across all industry sectors, machine, and vehicle downtime costs businesses $260,000 per hour. Depending on the time of year, the costs can be higher, especially for cold chain 3PLs and shippers. For example, cold transportation vehicles are equipped with IoT sensors that monitor mechanical assets for such things as leaks, pressure drops, and temperature variances. This level of intelligence can mitigate product defects that result from faulty or failing equipment in trucks and other transportation vehicles.

On-premises Deployment

On-premises deployment is often referred to as a “private cloud.” This form of deployment does not offer as many benefits as cloud based or hybrid deployment because they often require the use of a physical server. Therefore, traditional on-premises transportation management and warehouse management systems are often referred to as legacy applications. Legacy applications can make it difficult for a business to keep pace with supply and demand. Although they may offer useful data, they can quickly become obsolete because they eventually can only address outdated business challenges. So, the older the system the more a business is susceptible to risk and disruption.

Datex Fast Fact

Modern SaaS technologies can be modified for less than 20% of the cost to modify a legacy application

Managing Logistics with Cloud Computing

Fostering and maintaining a responsive and effective supply chain demands logistical efficiency. Human workers once managed every detail of logistics operations. Now, cloud computing and big-data analysis are enabling businesses to digitalize and automate the most important tasks.

Here are some logistics-related management capabilities that cloud data and computing offer:

Managing the movement and allocation of ocean vessels, trucks and other shipping vehicles
Sequencing and prioritizing new orders
Automatically generating or updating supply or shipping routes
Automatically filling out compliance documents, invoices

ado soCloud Computing Helps Automate Inventory Management

In the past, businesses utilized a “just in time” production and shipping model. However, the pandemic showed “just in time” processes are not a viable way to run manufacturing and distribution operations. Subsequently, this process caused a critical material shortage that affected:

64% of the healthcare industry

59% of the retail industry

50% of the food service industry

As a result, many businesses now utilize a “just in case” supply chain model that ensures critical products and services are always available in the required quantities. To do so, businesses are automating their inventory management processes. Cloud computing ensures that this is possible by helping to power advanced technologies like machine learning and artificial intelligence. Furthermore, these technologies can be used to identify critically low inventory levels in warehouse locations or retail stores and automatically send updates for replenishment.

Cloud Computing Helps to Optimize Forecasting

Forecasting and making predictions about the future is one of the most important functions within logistics management. The cloud unifies these data streams so that logistics professionals can engage in analysis of big data and make accurate forecasts for the future based on current trends. Therefore, cloud computing is vital for effective enterprise planning and logistical forecasting.

The cloud enables forecasting by collecting and organizing data from different sources to construct full awareness of current and future supply and demand. These sources may include:

Customer service channels
Online sales portals
Retail locations
Wholesale suppliers

The ability to anticipate future sales demand enables businesses to alter their processes to ensure that supply matches demand. For example, cloud computing makes sure major pharmaceutical companies like Bayer can keep critical and over-the-counter medication in stock throughout the nation year-round. In fact, the correct technologies can give several months of forecasting and prediction data that can mitigate disruptions from seasonal demand or unpredictable demand changes.

Improved Sourcing and Procurement

Today, it is important for businesses to maintain relationships with a high number of suppliers of finished products and raw materials. Sometimes, these numbers can reach into the hundreds and thousands. In such cases, cloud services can automatically initiate distributed computing. One method of distributed computing is load balancing. Load balancing refers to the process of redistributing network traffic to ensure that computing machines are not overloaded, underloaded, or idle. This method can speed functions such as response time and execution time.

In addition, cloud computing fosters relationships by digitalizing sourcing and procurement processes. Therefore, the cloud acts as a data center, collecting and gathering information so business partners can access information as needed in real-time.

Benefits of the cloud for sourcing and procurement include:

Faster communication between partners
A single source of documentation to eliminate errors and unnecessary purchases
Automatically generated invoices, custody documents, and databases for traceability

Datex Fast Fact

Migrations to the public cloud can reduce CO2 emissions by 59 million tons per year which equates to taking 22 million cars off the road.

Using The Data Cloud to Foster Sustainability

The most efficient logistics networks utilize data to make decisions that optimize processes not only for their business and customers but also society and the planet. To increase sustainability, businesses must be able to understand current supply chain needs and take actionable measures to meet sustainability goals.

Due to its architecture, the cloud enables businesses to reduce carbon emissions as well as facilitate sustainable innovation and research by enabling scientists to identify and discover new methods to bring social and economic change. Scientists can do so because of the web of data networks and data analysis cloud computing can power.

One of the greatest advantages that cloud storage and computing offers is the ability to integrate and analyze massive amounts of data, which is unattainable with traditional on-premises servers. For example, the cloud enables algorithms that can:

Discover and connect to real-time data sources
Accelerate data integration and reporting
Deliver accurate carbon accounting
Measure performance against goals
Enable intelligent insights to take effective action

Datex Fast Facts

Approximately 50% of supply chain executives report that the cloud has helped them successfully increase resilience by 52% and sustainability by 48%

Conclusion

Advanced technologies like cloud computing are ushering in the digital transformation of the supply chain and logistics industry. Many experts feel that these efforts are just getting started. Therefore, the future of cloud computing is bright.

Cloud environments are being utilized to increase the efficiency, reach, and performance of supply chain operations around the world. In addition, they enable enhanced cost management processes that can increase profitability. Therefore, the value of the cloud cannot be understated.

Cloud technology has made it easier for businesses to access information remotely. The cloud helps businesses at every level, from planning and sourcing to manufacturing, logistics, and distribution. This enables data to be managed more effectively and efficiently by storing data in one central location without the need for dedicated hardware resources.

Businesses all over the world are utilizing cloud applications and data services, from a simple email content delivery network to complex IoT sensors in cold storage warehousing and delivery. Cloud computing is also affordable for all types of businesses.