By Kelly Thomas, SVP of Manufacturing at JDA Software.
Over the past 24 months, the interest in cloud computing - a general term for software deployed through hosted, managed services and software-as-a-service (SaaS) models - has continued to grow. As a result, the movement of more business applications into the cloud is becoming more prevalent. This popularity is made clear when you consider the recent report from ARC Advisory Group, which revealed the supply chain management market grew 7 per cent in the last five years, while the SaaS market, grew at a compound annual growth rate in excess of 20 per cent during those same five years. Add to this Gartner's predication that, by 2012, 20 per cent of businesses will own no IT assets, and it's plain to see how core the cloud now is to the future of IT.
With the need for more reliable forecasts and rapid implementations, manufacturers are seeking solutions that leverage the benefits of supply chain planning applications without the traditional investment of implementing on-site technology, providing faster time-to-value and lower cost of ownership. This is where cloud computing can provide manufacturers with new ways to benefit from a fast return on their supply chain management investment while avoiding hefty upfront hardware and infrastructure costs. As a result, manufacturers can improve forecast accuracy and provide more reliable demand visibility, which leads to enhanced customer delivery performance, improved cash flow and reduced inventory across the supply chain.
For a manufacturer's supply chain itself, there are several advantages that cloud computing can bring. First, the metrics are quantifiable. In today's dynamic business environment, the ability to deploy sophisticated planning solutions in just a few weeks and with minimal staffing requirements creates an exciting new opportunity for manufacturers to rapidly optimise operations, respond to new market challenges and reduce costs. This capability enables businesses to quickly start generating reliable forecasts and optimised master production plans based on a global view of customer demand. By bridging the gap between front- and back-end planning, organisations can more efficiently satisfy customer demand, while improving overall profitability through better inventory investments. Improved sales, reduced cost of goods sold, increased asset throughput and a decrease in inventory are just a few of the potential top-line and bottom-line benefits of cloud-based solutions.
Secondly, overall supply chain performance is improved. Cloud-based supply chain solutions offer robust supply chain and master planning capabilities. This can be achieved no matter how complex the supply chain, even if it includes factories, distribution networks and suppliers. An intelligent supply planning optimisation workflow produces a global master plan that delivers comprehensive analysis and visibility, as well as proactively identifies exceptions and supply chain constraints. Popular cloud-based features include:
- Inventory, factory operations, distribution, capacity and supplier shipment plans
- Pegging and allocation capabilities
- Multi-dimensional demand prioritization
- Forecast netting, spreading and expiration
- Forecasting based on revenue, units, margin and other financial and corporate measures
- New product forecasting and workflows
- Demand consensus workflows
- Exception-based alerts
- What-if analysis and side-by-side plan comparison
These benefits can be realised in eight to 10 weeks far shorter than average ROI on most IT implementations. The quick deployment of a cloud-based solution is due to its hosted delivery model, template-based dashboards and workflows, robust reporting and analytics capabilities. Hardware does not have to be procured or installed inside the company. Instead, businesses can leverage the infrastructure already in place through their managed services organisation. Within eight to 10 weeks, the business will see supply chain improvements based on reports that analyse items, such as the annual operating plan and outlook, the forecast waterfall, on-hand and projected end-of-quarter inventory and delivery performance, among others.
In today's climate, budgets are tight and manufacturers are always looking for ways to make themselves more efficient. The time and money saved by using cloud-based solutions could make the difference as manufacturer's look to come out of the economic gloom.