How Cloud Technology Can Transform Supply Chain Performance
CIO - When Carly Simon sang the words "...they were clouds in my coffee" in her 1972 megahit, "You're So Vain," the notion of industrialized cloud-based computing was several decades in the future. Steve Jobs, speaking at Apple's Worldwide Developers Conference in 1997, alluded to the fact that the concept had actually germinated some 10 years earlier.
But Jobs' vision was prescient relative to what we now think of as cloud computing. He was arguably the first to see the huge promise and seismic shift brought on by the advent of device-independent data accessible from anywhere, at any time, on any type of technology, be it an iPhone, iPad, PC or other smart device. This is common today for personal effects such as music, video and financial services-but only recently has this capability begun making its way into the fundamentals of supply chain management.
In Global Economy, Supply Chain Management Only Gets Tougher
Like pouring gasoline on a fire, large-scale changes in supply chain behavior began toward the end of the last century. The concerted rush to move substantial volumes of North American and European manufacturing capacity offshore provoked this trend. For many, the math was simple: It cost so much less to make things in Asia that the extended supply chain and additional cost was more than offset by the financial windfall stemming from labor arbitrage.
One key disadvantage, though, was the significantly longer and more complex supply chain necessary for moving products to the consumption centers in North America and Europe. A lack of robust transportation infrastructure in the Asia Pacific region, and a similar absence of reliable transportation and logistics data, further compounded this challenge, making any kind of reliable visibility into the supply chain a forlorn hope.
In the United States or European Union, if an apparel maker ships to a retailer, it typically puts the product on a truck and often the same driver makes the delivery no more than two days later. In the brave new world of global supply chain management, it can easily take three to four weeks, or longer, to deliver the same product to the end user. This can be further exacerbated by rapidly spiking fuel costs, which leads directly to "slow-steaming" and "super-slow steaming" among ocean liner carriers. "Visibility" of domestic shipments is generally much simpler, then, with fewer trading partners and a much less complex supply chain.
Related: The CIO as Supply Chain Manager
These extended, complex global networks also have a greater tendency to be affected by the seemingly persistent state of change in today's global business environment. This in turn creates a desire for agility and dynamic responses at a rate that supply chains are largely unprepared to accommodate.
One core challenge is the basic ability to keep an eye on a product as it moves through these extended supply chains. A phone call or email to a domestic carrier used to give you an answer in minutes or hours, since it was frequently the only service provider for a specific shipment. That's often no longer the case. An international shipment may well have eight or more trading partners, all with a role to play: Manufacturers, origin draymen, consolidators, ocean carriers, customs brokers, pier draymen, stack train operators, destination draymen and freight payment companies.
International supply chains involve complex relationships with multiple trading partners.(Source: Accenture.)
Supply chain visibility has been a holy grail for more than 20 years, but it was an elusive goal, until recently, due in large part to the technological limitations stemming from trying to connect large numbers of disparate trading partners. That landscape has now changed significantly.
Despite efforts to build technology that would enable visibility, reliance on the one-to-many connectivity requirements remain a primary difficulty for many. A shipper may need to connect to hundreds, or even thousands, of trading partners (as shown above). That's a challenge: Many trading partners are small, unsophisticated companies that lack the capabilities or inclination to be connected. If you can't connect with virtually all of your trading partners, there are holes in the supply chain. This can make the data and reporting suspect and, ultimately, unusable.
This is also a challenge for service providers. In the extended scenario, every carrier would individually connect with each of its major customers and trading partners, each with its own specific requirements. This adds a large burden in terms of communication as well as maintaining up-to-date information on what could be hundreds of customer portals or other communication connections.
Can Cloud Connect Supply Chain Partners?
The answer to these challenges may be a cloud-based, multi-tenant platform. It also could be envisioned as a social-media community of customers and service providers, which is analogous to the concept of a social-media community for transportation and logistics.
Shippers, receivers and service providers all join the cloud-based community and readily connect to each other. You can go online and "friend" (now a verb) my chosen air carrier, railroad, truck line or ocean carrier. Just as easily, the service providers can friend its customers and clients. The virtue in this is you tap into an existing network and enjoy the full benefits of that immediately.
For the provider, you only need to put core information out there once-news announcements, changes, contacts, scheduling, public pricing, service options and so on. When you update your schedules, service or anything else, you only do it one time. All trading partners can see the same information at the same time. This is the cloud-future that's available to us now.
There's no silver bullet, and more work remains to be done. But-and it's a big "but"-a fully integrated, network-based community of trading partners can provide the foundation to drive business intelligence in terms of visibility and event management.
This platform can provide complete end-to-end visibility, preferably at the SKU level. Once you have that, you can see into your supply chain and determine what's causing the most common disruptive bugaboo: Transit-time variability. Simply put, if you have variability, you need inventory to cover potential stock-outs if you don't perform well. On the other hand, if you can see inside the entire supply chain, you can determine what's causing the variability.
Some things can be fixed with corrective action. Some things can't be fixed, so you may need to either adjust your plans or alter your supply chain to remedy the situation. The long-term benefit, however, is having the core tools to do an accurate diagnostic and break-fix that will drive continuous improvement of supply chain reliability and predictability. With a reliable and predictable supply chain, you can produce trust in performance-and when you do that, you remove excess inventory in the pipeline. This is one of the major levers in producing bottom-line value from improving supply chain performance.
The ability-and capability-from a process and technology standpoint is in its infancy. No one has mastered it yet, but the opportunities exist to improve supply chain performance markedly to drive out real and meaningful value across the enterprise.
Brooks Bentz is a managing director in the Operations Consulting group at Accenture, a global management consulting, technology services and outsourcing company. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.
Read more about supply chain management (scm) in CIO's Supply Chain Management (SCM) Drilldown.
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