Get ready for supply chain in the cloud

Having worked at Oracle on the ERP side during the mid-1990s, I saw plenty of ambitious promises around technology and supply chain. The experience left me jaded, but intrigued about how technology would impact industrial structure by separating information flows from physical product flows in ways that would alter the balance of power among players in the value chain. Nearly 20 years later, the promise is finally here with the “cloud” dramatically accelerating this separation, and power increasingly up for grabs.

Is cloud good for supply chain? In a word, yes. By providing the playing field upon which all information can be seen by all players, cloud eliminates much of the mess created by time lags between when something happens (part shortage, change order, transport delay, etc) and when everyone impacted knows about it. This means rapid problem resolution need no longer be an act of supply chain heroism, but instead part of the routine work of continuous supply/demand rebalancing. The concept of a “control tower” was eloquently described by Jim Rowan, COO of Dyson at an SCM World event last year, and rings true for many as a path to the proverbial “single version of the truth”.

Lower cost of entry

Perhaps equally important is the way players get on to the playing field in the first place. Unlike rolling out modules of an ERP system or establishing dedicated EDI links, most of the work can be done remotely and quickly. This means costs are lower and generally expensed rather than capitalised. Smaller suppliers that might have been unable to justify the effort or cost of connecting electronically in a pre-cloud world will find the barriers to entry much lower. For the big guys this means better multi-tier visibility into the supply base and thus less risk when disaster strikes somewhere deep in your bill of materials.

The net effect is a democratisation of the supply chain. Unlike processes I saw back in 1994 at Advanced Micro Devices, where production control held all the power because they alone knew what was really possible in back end assembly and test operations, cloud-based supply chains give all players a chance to score. Information is power, and with cloud that power can be shared and multiplied very easily.

The dark side

Proponents of cloud often use familiar analogues to demystify the technology, pointing out that we are already using it with things like Facebook and Amazon. While these examples certainly take away doubt about whether cloud works, they are not exclusively benign. The analogy to high schoolers throwing a party via Facebook is fair enough – before you know it there are 150 screaming kids in your house, all because the barrier to entry is low and the time lag is miniscule. Control and security are going to be vital.

Cloud is also not free. Most will concede that even the best applications of cloud technology in supply chain can’t do much without the transaction data and system-of-record capabilities provided by SAP or Oracle. Rather than replacing such legacy systems, most supply chains will layer cloud applications on top of what is already there. Good news from a transition planning standpoint, but not really an opportunity to save money on systems.

Survival of the smartest, and the fastest

Cloud doesn’t really change anything in supply chain from a process perspective, but by making information ubiquitously available it does promise to reward those who make good decisions quickly. The more agile supply chain organisations will thrive, while the more bureaucratic will suffer. Smaller companies will also find a more level playing field compared to big companies, creating ripe conditions for overnight successes and sudden flameouts alike.

This all may sound great to a Schumpeterian creative destruction buff, but it does raise the stakes for the average supply chain professional just trying to survive. Don’t be caught off guard by this technology shift, because its impact will be huge but sneaky. Supply chain people who rely on routine rather than smarts to get by will find themselves exposed as the game speeds up.

Accelerated learning is what the cloud really means in supply chain.

Kevin O’Marah
Chief Content Officer
SCM World

Please contact me directly with any comments, questions or suggestions. I welcome your feedback.