As UK Manufacturing slowly emerges from the global recession, Jez Tongue of @logistics Reply explains how cloud computing presents a new opportunity for manufacturing supply chains.
Software as a Service (SaaS) is rapidly becoming “business as usual” rather than a stop gap or contingency, and it’s the supply chain and distribution arena – seemingly the last industry sectors for new technology to penetrate – that are set to benefit hugely.
Today’s manufacturers face an extremely complex and challenging environment for logistics and distribution. With the provision and return of goods via multiple channels being ever more chaotic and sporadic, the continuing skittishness of the retail sector has meant that manufacturers are under huge pressures to meet increasingly tight SLA’s and customer expectations.
This has increased uncertainty in supply chain activities and prompted a rise in small, temporary logistics contracts or supply chain collaboration projects, igniting interest in flexible, low risk applications offering rapid-time-to-value, minimal investment and IT interruption and the option to be “switched on or off” in line with demand.
Too many business-critical, back-office operations run on IT infrastructures that are essentially fixed, off-the-shelf products.
Based on an OpEx, “pay as you grow” payment model, the SaaS model has the ability to scale as a business grows in capacity and complexity, but more compellingly it provides businesses with the option to downscale and pay less if business is slow.
With an on-premise supply chain execution solution, for example, users are required to invest heavily in a fixed number of licenses, servers and IT people, an on-demand solution aligns the operational requirements to the number of functions activated on the system so only the “capacity” used is paid for.
These subscription-based solutions are also a cost-effective route for small and medium-sized manufacturers because of their lower barriers to entry. Rather than a significant CapEx investment, a hosted platform requires minimal upfront cost. Instead, operating expense is smoothed over a number of business cycles, in which users pay only for the capacity and features they use.
On-premise, licenced software solutions also always come with a recurring, annual support and maintenance cost – typically 20 to 25% of the cost of the original licences – plus the requirement to upgrade to the latest version of the application every two to three years.
Although software licences have been bought and paid for by this time, there are always up-grade-related costs in the form of hardware/third party software up-dates, new up-grade implementation services and training on new functions and features, for example.
With a Cloud solution, such related burdens and costs are removed, as upgrades, maintenance and support – both hardware and application-related – are provided incrementally and invisibly as part of the service.
A major benefit of an on-demand platform is that it is quick and cost-effective to set-up – in some cases it can be up and running in four to six weeks, with the system paying for itself in less than six months.
Here, flexible automation is built into the project to support sustainable growth in line with the business’s operational performance and needs, resulting in minimal revenue and resource interruption as well as minimisation of any “service level dip”.
This ensures convenience for businesses with a limited budget for hardware and software investment, and limited IT personnel. This speed-to-benefit is a major differentiator from traditional supply chain projects, which can take many months to go live and many more to deliver any business benefits or efficiencies.
A hosted SaaS platform is ideal for operations requiring rapid start-up and for those which operate in uncertain scenarios or with very high transaction requirements. Increasingly suppliers are using the cloud to manage peak demands or one-off projects.
Ultimately, and by its very definition, with SaaS, the quality of service is paramount, meaning the buyer is always in control. Because of the monthly payment method, a SaaS vendor has to constantly delight its clients – not just in the pre-licence purchase phase.
If the consumer of the service does not want to continue, they simply stop paying the monthly bills. That is what I would define as the ultimate control.