There can be no question that the cloud is the platform of choice for supply chain applications and systems now and in the foreseeable future. While numerous surveys indicate that cloud adoption is still in a relatively early stage – slightly less than half of all warehousing, supply chain planning, global trade and product lifecycle management (PLM) processes reside in the cloud – adoption has reached these levels in a remarkably short time and significant continued growth is expected to increase these numbers dramatically in just the next couple years.
Companies are drawn to the cloud for a number of reasons, the most important of which are faster implementation, cost savings, and an enhanced ability to deliver improved customer service. It doesn’t hurt that virtually all of the innovations and new applications in supply chain management including enhanced visibility and control (Industrial Internet of Things (IIoT), big data analytics, advances in mobile technologies) tend to be either exclusively cloud-based or are more effective in the cloud environment. The supply chain is by nature a distributed environment with participants spanning the globe. Cloud-based systems are particularly well suited for this environment where there is no inherent advantage for centralized in-house systems; the cloud is designed and built for remote access and broad connectivity.
The fastest growth area for movement of processes to the cloud are PLM, global trade, and ideation and innovation, at least in part because these processes are less well established in the cloud compared to warehousing and planning. By 2018, all five business areas will be very near or above the 50% level. All three of these high growth areas are well suited to cloud deployment since they are by nature rely on widespread connectivity for distribution of and access to information for product support, navigating multinational business challenges, and support for collaboration.
Given the advantages of the cloud for support of supply chain processes, the main question might be why cloud adoption hasn’t been faster and broader. The short answer is that new technologies are often distrusted and must prove themselves before companies will trust them for critical business processes. In the case of the cloud, the major concerns – access/availability, security, and control – have been largely dismissed. In fact, cloud-based applications demonstrate higher availability (up-time) and reliability, tighter security and resistance to hacking and cyber-attacks, and much better performance in terms of data protection (off-site back-ups, hot-sites/failover) than is usually delivered by on-site IT resources. And those IT resources welcome the cloud as a way to off-load the routine care-and-feeding of existing systems so they can apply their efforts to better user support and exploration of new systems and technologies to advance the business and stay competitive.
A recent Supply Chain Digest study concludes “…companies believe they are more mature in supply chain process than they are in supply chain technology support… “ and “…(the) level of technology support ranked just behind “lack of ability to design/execute “end to end” processes” as the top barrier to improved supply chain performance.” In other words, companies realize that technology is key to future competitiveness, and failure to adopt emerging technologies like cloud-based supply chain management processes can become a credible threat to their ability to improve performance.