Currently, supply chains are better able to develop their services in conjunction with technology. Cloud computing services have both positive and negative features that can work for this type of business. However, the common perception is that operating within a cloud environment is always more cost-effective than performing the same functions on-premises, although this is only true under certain conditions.
While many logistics services are best developed with good planning and management, these are generally driven by the IT department, which accounts for approximately 70% of the corporate data generated or used by the supply chain group. Therefore, it's advisable for this group to have a seat at the IT decision-making table.
How does the IT department help?
The IT department is interested in the time to return on investment (ROI), i.e., the ease of scaling and the software update rate. For supply chain professionals, it's important to know about data storage, available bandwidth, and support.
Additionally, since cloud costs vary based on usage, it will be necessary to forecast data volumes for specific applications to account for sudden increases, such as seasonal and holiday demands.
Costs of cloud-based supply chain applications
The major cloud service providers offer similar basic features, and their pricing is similar. It's a pay-as-you-go model for usage and everything else. However, each offering is difficult to compare on a like-for-like basis. This is similar to consumer services for undifferentiated products, such as utilities, mobile phone contracts, and health insurance, where multiple plans can be confusing. Therefore, they reduce customer churn, because switching is too difficult.
Too often, cloud service advocates assume that all of an organization's IT will be done in the cloud, but this isn't mandatory. The two main groups of customers are full-service cloud providers, known as Infrastructure as a Service (IaaS) and Software as a Service (SaaS), especially when they only access software applications.
For the supply chain group that focuses on the use of specific supply network analysis and planning applications, the selection consideration should be toward SaaS. Indeed, one of the costs an organization incurs is storage costs, but of greater importance for this group of chains are the associated risks. One of these risks is the risk of cloud service provider exit.
Since one of the main goals is to keep customers paying, service providers will be reluctant to let customers leave. Therefore, it is in their interest to delay data return and charge high fees for data return work.
Location of supply chain data
Supply chain data must remain on-premises, and data must be transferred on a need-to-know basis to supply chain applications. SaaS will be cloud-based. This approach is aided by local storage technology called software-defined storage. This architecture, which separates storage software from hardware, enables scalability at a lower cost. SDS is a software layer between physical storage and data that controls storage requests.
SDS controller software provides connectivity to devices, networks, and storage access services, including the provision of data in a cloud service. Using a SaaS model, but with on-premises data storage, provides leverage for renegotiating a contract if, in an effort to increase revenue, an application software provider changes its charging base. The cost of bandwidth used can be a significant factor in cloud charges, depending on the volume of data being transferred to the cloud service provider.
Improve data transfer with a digital platform
Data transfer via a platform is an important consideration for data entry-to-response time. However, bandwidth charges can be reduced if data collection activities remain on-premises and are linked to the data storage facility. The data generated in a transaction is converted into information that can be stored and used.
When your organization chooses to provide data for analysis of a cloud-based SaaS application, the importance of a cloud service provider's support services is reduced, as the responsibility shifts to the software vendor.
This is important because some forecasts estimate that in the coming years, IT applications designed for supply chains will be deployed in the cloud. Therefore, with tools like ToolRides, you can be much more closely involved in the decision, but from a different perspective. Many supply chains benefit from ToolRides.
