BY JAMES COOKE, EDITOR AT LARGE
cloudy with a chance of savings
A CLOUD SEEMS TO BE DESCENDING ON DISTRIBUTION,
and that’s probably a good thing for companies looking to save
money. The cloud in this case is not a mass of water particles, but
cloud computing, the latest development in information technology.
A new report from the research and advisory group Gartner suggests
that companies are increasingly turning to cloud-based solutions for
supply chain applications and that by doing so, they’re shaving beau-coup dollars off their information technology expenses.
What’s cloud computing, you ask? It’s an arrangement in which
services and data storage are provided over the Internet (the cloud is
a metaphor for the Internet). Basically, the vendor hosts the application on its own servers, and the user obtains access to the application
through a Web browser. Companies using cloud computing avoid the
hassle and expense of installing software programs on
their on-site computers and servers.
If the Gartner report (“Significant Benefits Realized
With Supply Chain Management in the Cloud”) is
any indication, cloud computing has taken the supply
chain community by storm. In a survey conducted
this summer over 130 companies in the retail, consumer goods, manufacturing, and high-tech sectors,
the research firm found that 95 percent of the respondents were either using or were considering using
cloud-based supply chain applications. That’s a jaw-dropping finding when you consider that there were
few cloud-based supply chain solutions available just
two years ago.
You’re unlikely to hear complaints about limited
software availability today. When I first reported on
this development in 2008, I noted that it was mainly transportation
management systems (TMS) that were delivered via the cloud. But
now users can choose from a broad array of offerings. In fact, the
Gartner research suggests that the cloud has enveloped virtually every
category of supply chain application—from supply chain execution
to planning, from manufacturing to e-commerce.
As for which apps companies are most interested in using over the
cloud, the Gartner survey indicated that customer relationship management (CRM) software was the top choice, with 82 percent of the
respondents either using or evaluating the use of a cloud-based solution. Next on the list were supply chain execution programs, which
were cited by 76 percent of the respondents. That’s significant since
execution applications for warehousing, transportation, and yard
management are among the most commonly used in distribution and
That’s not to say there haven’t been holdouts.
There are still some companies that are dragging
their feet when it comes to cloud computing. As
for what’s holding them back, in some cases, it’s
concerns about security and data ownership. In
others, it’s a reluctance to undercut a heavy
investment in enterprise resource planning
Those who have taken the leap are already seeing benefits. Thirty-eight
percent of the respondents
to the Gartner survey
reported that they had
reduced their supply chain
costs through cloud computing. For industrial manufacturers, most of the savings came from optimizing
supply chain expenses. For
consumer goods companies,
the gains came largely
through reducing their costs
to serve customers.
Although the survey
respondents had little trou-
ble identifying the source of their savings, it was
a different story when it came to quantifying
those savings. Only 41 percent of the respondents
using cloud-based solutions said they were able
to measure the savings they had achieved. Those
that could, however, reported impressive results.
Nearly three-quarters said they had cut their
information technology expenses anywhere from
5 to 20 percent.
Given the savings potential offered by cloud-based applications, it’s a sure bet that more and
more businesses will be embracing this approach
to software use and deployment. My forecast for
the next year: Expect to see the clouds thicken
over the supply chain. ;