Taking the Cloud-First Approach to Supply Chain & Logistics Technology

Few would argue the impact that Cloud computing has had on the world—and the logistics arena is no exception. Initially making traction on the transportation management systems (TMS) front and then radiating over to the global trade management (GTM) sector, Cloud-based software has all but taken over nearly every corner of the supply chain management (SCM) world.

Early on, there were concerns about how companies would “lose control” over their data once it went into the Cloud, and that such data would be especially prone to breaches and hackers. But as this software delivery method matured—and as technology vendors shored up their systems and addressed key concerns—those early fears have been overshadowed by the sheer benefits of moving from on-premise software to Cloud-based solutions.

Clint Reiser, research analyst with ARC Advisory Group, says that Cloud-based software’s low upfront costs (i.e., not having to purchase and install a program) and the fact that upgrades and patches are handled by the vendor (versus an in-house IT department) make it immediately attractive for shippers.

“Suddenly someone could purchase software using a subscription-based model, similar to a payment plan over a five-year period,” Reiser points out. “This pay-as-you-go approach was one of the more attractive elements of Cloud solutions.”

Going a step further, some vendors gave shippers the option of using only the functionalities that they needed to use on a “menu” basis versus having to purchase and install an entire software program that wouldn’t be utilized in its entirety. Companies could also select from different delivery modes, with the main options being single-tenant (one system is hosted in a particular Cloud instance of the software) and multi-tenant (multiple shippers’ data coexist in the same infrastructure and run the same shared instance).

“When it comes to the Cloud, there are different perspectives and layers that can be peeled away, but its key benefit is the fact that it delivers connectivity via a single, centralized system,” says Reiser. “This, in turn, allows shippers to aggregate information and gain visibility across previously siloed entities. That’s where the real value lies.”

Scalable and elastic

Defined by Gartner as “a style of computing in which scalable and elastic IT-enabled capabilities are delivered as a service using Internet technologies,” Cloud computing can be found in nearly every nook of the supply chain management world. In the GTM sector, for example, shippers need high levels of visibility over their international trade movements, compliance requirements and regulatory rules. “They not only need to be able to access data across corporate silos,” Reiser points out, “but also potentially around the globe.”

The same goes for transportation networks, where demands for high levels of visibility are being met with Cloud-based TMS. Within the four walls of the warehouse, today’s warehouse management systems (WMS) are a “lagging solution in terms of Cloud adoption,” says Reiser, but still making that slow progression into the Cloud as vendors address key sticking points like latency issues.

Singling out JDA’s new Luminate Warehouse solution, Reiser says the vendor is working to enhance its existing applications—and add some new ones, such as machine learning and artificial intelligence—all in the Cloud. He sees AI and machine learning as the “next wave” in Cloud computing for SCM and envisions a time when shippers will be able to extract data from third parties (i.e., weather data, social media data, etc.), run it through machine learning algorithms, and then use it in conjunction with their on-premise WMS.

“Adding machine learning capabilities to existing applications can be done through Cloud applications,” says Reiser. “I think that was an insightful way for JDA to add on some more advanced functionality to its existing solution set that, in many cases, customers have been using for years.”

Addressing key concerns

Make no mistake, security is still a concern for any company that’s moving from on-premise to Cloud-based SCM solutions. However, Reiser says data privacy seems to be the key concern at this point, what with the myriad, high-profile incidents that have happened over the last few years (e.g., Facebook, Sears, Delta, and the list goes on).

“I hear a lot of differing views on this, with many vendors claiming that their systems are ‘much more secure’ than on-premise solutions,” Reiser states. “There are certainly concerns about data privacy, but I’m not sure that hacking is as much of a concern with today’s Cloud solutions as it has been in the past.”

Adam Coonin, Capgemini’s North America digital supply chain technology service line lead, says companies in the aerospace and defense industry have been particularly reluctant to use the Cloud, and mainly due to security concerns. “That’s mostly because their chief information security officers don’t want to take on any of the risk associated with Cloud computing,” says Coonin, who also tells companies to consider the costs associated with long-term Cloud software usage.

“Something that still may hold companies back on the SaaS front is that they’re going to pay more money for the software if they plan to use it for a greater duration,” says Coonin. “So, instead of buying it outright and using it for as long as you want to, you’re paying an annual or quarterly subscription fee. At that point, the decision to use the Cloud becomes a CFO type of decision.”

Celestica: Cloud is the way to go

For Celestica, Cloud-based technology is the “way to go,” according to director of global services Ryan Bloor, who distinctly remembers when the global electronics manufacturer first started shopping for a TMS to reduce global transportation costs and improve visibility across its end-to-end supply chain. The pushback from the IT side of the organization was almost immediate and rooted in the IT team’s concerns about potential security issues.

“When we initially engaged for the Cloud-based TMS, there was some definite apprehension about moving over to the Cloud,” says Bloor. “However, knowing that outsourcing transportation or logistics is definitely one of the more mature areas for supply chain, it just seemed logical that TMS would be one of the leading-edge technologies to go into the Cloud.”

To overcome those security-related anxieties, Bloor asked the manufacturer’s head of security to get involved with the initiative “right from the get-go,” and to be part of the solution development for the firm’s new MercuryGate TMS. And while that solution wasn’t the first piece of technology taken into the Cloud, it was definitely one of the earliest.

“The fact that MercuryGate TMS is Cloud-based was one of the key decision points in our choosing their product,” said Bloor. “With the flexibility of software maintained and deployed in the Cloud, we are able to stay current as the industry changes.”

And with that, Celestica’s supply chain operations moved into the Cloud and Bloor’s team hasn’t looked back since. Its customer relationship management (CRM) solution is also Cloud-based, according to Bloor, as is its business intelligence tool.

For Celestica, the key benefits of moving supply chain management into the Cloud include upfront costs and the ability to utilize multi-client, Cloud-based options versus having to invest in local, onsite installations and hosting. The company can leverage a centralized, secure server farm, Bloor says, rather than having to potentially manage multiple, on-site solutions across a global operation.

“Not having to continually invest in those on-site costs was certainly one of the benefits,” says Bloor, who points to fast transaction times enabled by strong supplier infrastructure support as yet another benefit. “In recent years, we haven’t had any transaction-related incidents in terms of infrastructure prolonging our transaction times,” says Bloor. “In fact, I don’t even think about that anymore.”

Going forward, Celestica will put even more of its applications into the Cloud while also expanding its use of those that are already in the Cloud, such as its business intelligence platform. Bloor says that will find the company focusing on improving its usage of data while also using AI algorithms to better represent the data that it generates.

Thanks to MercuryGate TMS’ extensive reporting capabilities, adds Bloor, Celestica’s executive management team now has a better understanding of how the firm’s logistics expenditures are being optimized. “We have an ongoing desire to expand with the provider’s BI solution and provide more real-time and better visibility to our various data elements,” he adds, “and with the connectivity that already exists in our Cloud-based solution.”

Putting the Cloud first

As Cloud-based supply chain software continues to mature, and as more companies adopt these solutions, expect to see more logistics managers embracing the features, functionalities and robust nature of these platforms. And with a focus on cost and payment models, CFOs will continue to take a similar interest in Cloud-based supply chain management software, Reiser predicts. Finally, IT organizations like Cloud for its ability to reduce their backend technology costs.

In the end, Reiser says that companies are giving Cloud-based supply chain management systems a second look because they’ve already accepted that software delivery model for other applications. “Now, Cloud is back-filling in a lot of other areas, supply chain included,” he adds.

“The penetration of Cloud software is prevalent. It’s everywhere,” says Coonin. “Even today, as our clients are selecting software, we’re seeing a ‘Cloud-first’ approach being used more and more. And while there are certain clients that want on-premise, I think we’ve really turned a corner with Cloud in SCM.”