In a poll a couple of years ago, 2/3rds of manufacturing enterprises reported using some type of cloud-based software. Projections show that the rate of adoption is only going to increase, with as many as half of all industrial software deployments being cloud-based by 2023. Manufacturing isn’t a standout area in terms of cloud adoption—plenty of different industries have even higher adoption rates—but manufacturing and supply chain operations are uniquely poised to benefit from the switch to cloud-hosted, decentralized IT.
That doesn’t mean there aren’t pockets of resistance. Large organizations tend to be understandably wary of change, and the act of migrating standard software to the cloud does carry some risks and challenges. Are those risks worth it for your company? Here are five reasons why they might be.
Okay, let’s start with the big one. Moving your supply chain management to the cloud can reduce your IT costs—full stop. How does it do that? On the one hand, it can reduce the costs associated with operating internal IT by up to 30%. Since you don’t need to perform in-house server maintenance, upgrades, security checks, etc., you simply don’t have the same specialized IT staffing requirements. Not only that, but you don’t have the same expensive hardware requirements. Since the effective life of a given piece of hardware is really only a handful of years, this is an area where the cloud has a huge TCO advantage. On the other hand, you can also use cloud deployments to root out parallel or redundant software deployments across your operations, resulting in another significant reduction in costs. This is before we even get into the ways that cloud-hosted software can power smarter business processes that are drivers of cost savings in and of themselves.
In the above reason, we slipped in a quick mention of the reduced costs related to performing maintenance—but in point of fact this deserves its own bullet point. It’s not just that the cloud reduces your costs by saving you from ongoing server maintenance, it also helps you avoid the possibility that the software you’re running will become obsolete legacy technology that doesn’t play nicely with the rest of your ecosystem. Indeed, cloud applications are maintained by the solution provider with an eye towards effectively future-proof software. Rather than watching the doomsday clock count down to the moment your favorite SCM application will no longer be supported, you can move forward with confidence that the software you rely on is being constantly updated to conform to the changing state of modern SCM software. The result is that you never have to worry about your software going out of date or being misconfigured—two common occurrences with on-prem software that can result in disruptions.
4. End-to-End Visibility
With a centralized, on-prem SCM solution, there’s always a risk of data silos—particularly if you have plants or other network elements across multiple geographic areas. This is obviously an issue. If your production planners in North America can’t see relevant data from the European plants with whom they coordinate because it’s only available on a local network, those planners won’t be able to do their jobs with maximum efficiency. This issue is likely to cut both ways, which means that different touchpoints on your value chain could easily find themselves working at cross-purposes. Because cloud solutions are decentralized by their very nature, this issue won’t crop up. Users in any location will gain the data visibility they need to make informed decisions up and down the chain, because the ability to access data remotely is one of the basic facts of the cloud. And, because your cloud solution is more likely to integrate with the solutions used by your suppliers and logistics partners (assuming that they, too, are doing some of their data storage and planning in the cloud), you can actually gain visibility across a variety of touchpoints. From there, you can power real-time data flows that are fed into advanced analytics algorithms that can generate highly-sophisticated demand and transportation forecasts.
Let’s say you’re a transport planner trying to find the ideal moment to lock in freight capacity with a particular carrier on a particular lane. You have a good sense of your parameters, and you want to book proactively in case space fills up, but you don’t want to get saddled with a higher price than necessary or book capacity that you don’t wind up needing. To make this happen, not only do you need to take in real-time data on an ongoing basis, you also need to rapidly analyze it so you can make the right decision in the moment and operationalize it without delay. Simply put, cloud-based solutions are better suited to that kind of time-pressure than traditional on-prem software. Not only does the cloud make real-time data from multiple sources feasible in a way that it often isn’t for locally hosted software, it can also give you the scalable computing power necessary to quickly update your projections and choose the right options accordingly.
5. Industry 4.0-Readiness
At the end of the day, the picture we’ve been painting of cloud-based supply chain management is one of transformation: by changing your IT environment to be more connected and responsive, you can optimize the business processes that that software supports. The ultimate endgame of these optimizations? Industry 4.0 adoption. Indeed, modern manufacturing is slowly but surely working its way towards the smart factories, smart networks, and smart supply chains that prognosticators have long envisioned—and the cloud is a major pillar of that transformation. Why? Well, for all of the reasons that we’ve already discussed: it can improve connectivity, increase end-to-end visibility, future-proof your IT, and point you towards analytics-derived decisions faster than ever before. In this way, you can lay a sturdy foundation for the introduction of AI, cyber-physical systems, and autonomous machine decision-making across your value chain. Not only will measures like these save you labor and therefore costs, they’ll also empower you to transform your entire enterprise in support of smarter and more connected processes and structures.