Amid volatile global markets, the need for greater supply chain flexibility and visibility will drive investments in technology in 2012. Shippers and their providers looking for flexibility in their operations, whether in the positioning of inventory or deployment of transportation equipment, will seek the same rapid response discipline in their application of technology.
Delivery models such as software-as-a-service and hosted, cloud-based platforms will take market share from installed, on-premises software while providing companies with access to collaborative, multi-enterprise networks that promise greater efficiencies and lower costs.
Hosted and SaaS models, along with advanced analytics, are enabling collaboration on an unprecedented scale by allowing for users to leverage the collective expertise of vast networks of shippers, carriers and 3PLs. As the firewalls come down, spending on cloud computing is going up. According to information technology research firm Gartner, the cloud computing industry will grow to $150.1 billion in 2013, up from $56.3 billion in 2009.
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“Companies have invested heavily on IT that focused on interior functions, but today you compete as a network, not as a single company,” said Greg Johnsen, a co-founder and executive vice president of marketing and sales for GT Nexus, the Oakland, Calif.-based shipping industry technology company that operates a cloud-based platform for more than 15,000 global organizations.
Growing demand for greater visibility, a prerequisite for enhanced collaboration, is unlikely to change in 2012. “On the heels of uncertainty, we have seen an uptick in the trend to better visibility into the supply chain,” said Scott Byrnes, vice president of marketing at Amber Road (formerly Management Dynamics), an East Rutherford, N.J.-based provider of global trade management software.
The logistics world is ripe for a cloud environment, which Byrnes expects to saturate the market at a pace equal to cell phone penetration in consumer markets. Among new Amber Road customers, there is an “aggressive migration” to hosted and SaaS solutions, Byrnes said.
With uncertainty and volatility so prominent — the stakes are simply too great for many shippers in having inventory out of position or out of scale to demand — companies have made flexibility a priority. They are looking to IT software and service companies to provide flexible solutions that can be changed or modified as market conditions change, said Prashant Bhatia, vice president of strategy for RedPrairie, a Waukesha, Wis.-based provider of productivity software.
Red Prairie offers multiple deployment models for its transportation management systems, warehouse management systems and work force management software, including installed technology and hosted, Web-based software. At a time when many companies are putting off capital outlays, the majority of Red Prairie’s new customers are opting for hosted or SaaS services.
There are growth opportunities for IT providers in cloud computing and mobile technologies, but industry officials say there must be a cultural shift within companies for them to be realized. For many companies, that means moving beyond the conventional desktop. Some industry observers, for instance, already see the day when iPads or other tablets will be a common feature in shipping operations, from warehouses to the trucks and oceangoing ships that carry cargo. That means taking information and the ability to work with it off the desktop and into the mobile environment.
For instance, one of Red Prairie’s retail customers recently purchased 50,000 smartphones and distributed them to employees, in a single stroke changing the way the employees interact with the company’s IT applications. The move also changes the relationship between Red Prairie and its client, putting the onus on the provider to develop native applications for the mobile devices and to learn the retailer’s business so the technology can be put to its greatest use.
“You can’t just put 50,000 people on smartphone and say get to work,” Bhatia said. “You have to work more closely with your customers.”
JDA Software Group, a supply chain software provider based in Scottsdale, Ariz., regards cloud computing as a means to deliver supply chain expertise to customers. In general terms, cloud computing refers to the infrastructure, applications and capabilities that are delivered via the Internet. Each of JDA’s multiple supply chain applications can be delivered through the cloud via hosted, managed services or software-as-a-service models, said Joseph King, group vice president of managed services.
There are key differences between SaaS and hosted solutions. The former is multitenant; the latter is not. SaaS provides a set of standard capabilities with little potential for company-specific customization, although each user has a company-specific data partition and security infrastructure.
JDA’s managed service delivery model combines cloud technology with value-added services delivered by company subject matter experts for forecasting, planning, organizing and mission-critical activities across the supply chain. Benefits include rapid deployment, frequent reporting and data that is organized and formatted for analysis and quick action.
Cloud computing entered the logistics domain at a time when global supply chain cost and complexity made supply chain management a top priority within organizations. By breaking down barriers and delivering real-time information, the cloud enables C-level executives to understand the impact of supply chain errors or inefficiencies on the bottom line, King said.
In managing transportation, a core premise for JDA is to represent networks with as much detail as possible and to improve accuracy in planning and execution, said Fab Brasca, JDA vice president of global logistics.
Backed by cloud-based platforms, transportation management has evolved from standard reporting to detailed business intelligence and analytics that enable faster, more proactive decision-making. Benchmarking supply chain practices, once regarded as a long-term activity focused on industry best practices, can now be employed on an operational level with far greater frequency. “It’s about taking analytics and bringing them into the user domain,” Brasca said.
The emergence of Internet retailing as a multibillion-dollar industry has fueled demand for technology that can manage direct-to-consumer fulfillment. JDA’s TMS software has been modified to integrate parcel deliveries into the transportation mix instead of treating parcel as a separate, exceptional mode. “It’s a part of our concept of multimodal optimization,” Brasca said.
The big story for 2012 will be the expanded use of cloud computing to manage supply chains that feature unprecedented degrees of complexity and risk, GT Nexus’s Johnsen said.
IT providers will be challenged to help clients shift their focus from single organizations to the broader value chain. Hundreds of business processes that companies engage in every day are multi-enterprise by definition, such as transportation planning and store allocations, yet execution occurs behind firewalls in most cases.
Companies have to be nimble enough to change their supplier base, enter new markets and navigate around natural disasters, sometimes often at the drop of a hat. To do so requires different sets of technology for multi-enterprise commerce and inter-company collaboration. The potential efficiency gains are huge. Optimization efforts undertaken by companies in recent decades occurred with only about 20 percent of crucial data. The remaining data, which used to reside only within company internal networks, can now be accessed in the cloud.
Johnsen expects rapid growth in the use of cloud-based platforms as part of the trend to collaborative, multi-enterprise solutions. Historically, game-changing technologies like cloud require proof points, such as a critical mass of early adapters, before they are broadly accepted in the market. That has already occurred as Home Depot, Xerox, Procter & Gamble and others have launched cloud-based initiatives around ocean freight contracting.
Del Monte Foods, one of the world’s largest food producers, recently expanded the scope of services delivered through the GT Nexus cloud-based platform to include inventory and document management, in addition to ocean freight management.
Through vastly expanded data bases and improved analytics, cloud computing can streamline and standardize critically important functions such as identifying exceptions and measuring supplier performance. For example, if changes are made to a purchase order, it will change for everybody, in an instant, across the supply chain. “Cloud will do for supply chain partners what Facebook did for consumers,” Johnsen said. “It’s the first time there has been massive information sharing across the value chain.”
Contact David Biederman at firstname.lastname@example.org.