How the Cloud Makes Supply Chains Smarter and Stronger
What makes a supply chain more resilient to shocks? Find out.
First, Covid-19 disrupted supply chains, most visible as the global chip crisis. Then the Russia-Ukraine war broke down the supply of food, energy, and agricultural products. In a world prone to upheaval, Anant Adya, executive VP at Infosys Cobalt, shares how the cloud can help stronger and smarter supply chains that are more resilient.
The compound impact of these supply chain disruptions cost organizations, on average, US$ 182 million in revenue. Organizations which had fine-tuned their supply chains for maximum efficiency – producing in least-cost destinations and maintaining just enough inventory – were completely unprepared for the breakdown caused by the pandemic. Yes, factories were cutting production, and logistics were in disarray, but the biggest reason why their supply chains couldn’t cope was because they were opaque and suffered from information latency.
Without real-time information, leaders were unable to make critical decisions to mitigate the impact; what’s worse, the pandemic changed consumption behavior overnight, which meant businesses couldn’t rely on historical customer data to predict demand. It became clear that real-time, end-to-end visibility was absolutely critical to supply chain resilience.
Shock-resilient Supply Chains
What makes a supply chain more resilient to shocks? A few years ago, it would’ve been better risk management. But the events since 2020 have shown that supply chain resilience is so much more, including the ability to pivot under stress, fare better than the competition, perfect disaster planning, and maybe even tap new opportunities. Business leaders need to be able to make informed, timely decisions to counter impending problems, change tactics, or capitalize on an advantage.
Transparency, traceability, and real-time information flows are essential for providing accurate, up-to-the-minute insights to enable such decisions. Something that outdated technology, legacy processes, and traditional supply chain models are clearly incapable of. The solution is to modernize the supply chain with advanced digital technologies, such as artificial intelligence, robotic process automation, blockchain, and machine learning. And also cloud computing.
Where Does the Cloud Fit into the Picture?
The cloud cures all the data-related problems in a weak supply chain. For example, it can connect multiple systems belonging to various supply chain participants, from company factories and warehouses to supplier networks to distributors to logistics providers, enabling real-time information flows and transparency from end to end.
- Covid-19 exposed the vulnerability of supply chains in the face of demand fluctuations. The traditional, linear supply systems of most enterprises, which were designed for predictable, consistent demand, broke down when consumption patterns changed overnight. The disruption ran both ways – some supply chain systems could not ramp up to meet demand spikes; others remained idle amid slacking demand. A cloud-based supply chain system can easily handle these swings, thanks to the unlimited scalability of the cloud. Because cloud capacity is available on tap, enterprises can take only as much as they need when they need it. When the retail chain, Kmart Australia, re-hosted supply chain, inventory, and merchandise applications running on mainframes on a cloud-based mainframe emulator, it could predict trends better thanks to the availability of timely, accurate product inventory data. The move to the cloud also brought stability because the mainframe could scale up and down in response to the demand fluctuation during the pandemic.
- Modern supply chains are global entities dispersed all over the world. Not only users but even the supply chain systems themselves also need to access data, which could be located just about anywhere. Think of a manufacturer collecting digital data from thousands of sensors in all its factories and warehouses. Only the cloud can deliver the connectivity, integrations, and access to compute that it requires.
- Cloud vendors are also investing and innovating vertical-specific offerings that manage supply chain operations more effectively than souped-up generic solutions. These solutions leverage artificial intelligence and machine learning for analysis, resulting in better outcomes.
- Seamless information flows across the supply chain system to ease reporting by eliminating latency and manual intervention.
Cloud Computing for Smarter Supply Chain Management
The cloud adds to supply chain resilience in many other ways as well, for example, by providing scalability and access. Below are a couple of vital supply chain use cases for cloud computing.
- A digital supply chain twin: A virtual replica of a physical supply chain – can enhance resilience by providing a complete view of the system, its transactions, points of vulnerability, key nodes, material flows and more in real-time. Using a digital twin, enterprises can “visualize” supply chain operations and forecast demand, plan inventory, manage interactions with partners, and even anticipate disruptions before they occur. Given the enormous data and computing power involved, the cloud is the best environment for modeling a digital twin.
- A modernized data warehouse on the cloud can aggregate unlimited quantities of different types of data. It provides access to real-time information and insights, which is critical for maintaining the continuity of supply chain operations. There is a vast array of software solutions – including advanced analytics and artificial intelligence – that enterprises can access “as-a-service” to conduct supply chain modeling, strategic planning, risk/reliability assessment, etc.
A great example of how the cloud can make a supply chain more robust and responsive through data warehouse modernization comes from Toyota. In North America, the company had an on-premise vehicle data warehouse for recording data pertaining to forecasted orders, planning, manufacturing, logistics, incentives, and stocks.
Over time, the aging data warehouse suffered from several problems, including high maintenance costs and poor scalability, rendering it unsuitable for handling growing data volumes. To start with, Toyota built a data lake within its premises and populated it with the data from the old data warehouse. This was not a totally satisfactory solution since it resulted in duplication of data and new overheads; also, users needed to wait longer to get the data for analytics and other purposes.
The company then modernized the vehicle data warehouse by building a next-generation data lake on the public cloud. The source data was converged directly into the data lake, and all the legacy logic ran directly in it as well to provide enterprise-ready data marts for reporting. This produced several benefits, including a reduction in complexity, elimination of data duplication, higher data quality, and a foundation to run sophisticated analytics that would yield better insights and improve downstream applications.
Supplying Resilience on the Cloud
Who could have imagined supply chains breaking down in a globalized, connected twenty-first-century world? Yet that’s exactly what happened in the pandemic. Moreover, other events, such as repeated wars and climate change disasters, have made it clear that we will have to live with supply chain disruptions for years to come. A crucial factor in supply chain resilience is real-time information visibility because it enables enterprises to detect, avoid, and remedy issues in time. Adopting digital technology, especially the cloud, is the only way to achieve this visibility.
Have you applied any supply change use cases of cloud computing? Share with us on Facebook, Twitter, and LinkedIn.
MORE ON SUPPLY CHAINS:
- How Supply Chain Woes Are Affecting PC Vendors and What’s Next for the Industry
- Supply Chain Evolution: From Containerization to Computerization
- IT is Ripe for Modernization, But Supply Chain Issues Will Continue to Persist
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