This article originally appeared in the January/February, 2018 issue of PARCEL
It seems as if Mother Nature is having its way with the supply chain industry lately. While the mighty river of the “Amazon effect” is a disruptive element in creating new levels of customer expectations regarding the speed and visibility of goods in transit, the question of clouds —specifically cloud-based solutions — has come to the forefront as well.
There’s good reason for organizations to consider the benefits — agility, scalability, extensibility, affordability — of cloud-based solutions, especially when considering the growth and trends within the parcel market.
- Parcel growth is increasing: Parcel shipping volume is predicted to grow two percent (from five to seven percent) through 2018. While this figure may seem low, it is predicated on a large base figure. In 2015, the United States shipped 11.8 billion parcels followed by Japan (9.4B), Germany (3.0B), UK (2.2B), and France (1.5B), so the growth of the number of parcels is huge.
- Carrier dynamics are increasing: IT organizations are forced to keep up with the constantly changing requirements of parcel carriers as they add new services and update rates to reflect ever-evolving business models.
- Market complexity is increasing: One of the leading areas of parcel growth is cross border parcel shipping. If you consider that China represents the fastest growing retail e-commerce market — with expectations to be 47% of all retail e-commerce sales by 2020 — cross-border parcel shipments will continue to rise.
Based on these trends, it’s clear that organizations are in need of support to keep up with these demands coming from customers and the industry itself.
One of the central questions raised is, should a solution be all on-premise, all cloud, or a mix? The reality is that in the inter-related and inter-reliant world of SCM, an “either-or approach” won’t work. A successful approach will require a blend of cloud and on-premise technology in order to enable shippers to manage higher volumes, reduce costs and cycle times, enforce compliance, and improve customer service.
According to this year’s survey by Harvard Business Review Analytics Services, the top business drivers for adopting cloud and hybrid-cloud technology are:
- Business agility/flexibility – 49%
- Cost reduction/maximize IT investment – 43%
- Improved security – 37%
- System reliability/availability – 35%
- Ability to analyze/act on data – 34%
- Better customer experience – 34%
- Ability to innovate – 30%
By taking advantage of cloud adoption, organizations can tap into the “generic” benefits of quick implementation, operational flexibility, pay as you go services, automatic and regular upgrades, as well as updated security measures. But beyond the “generic” benefits, a cloud or hybrid approach to supply chain solutions can offer so much more:
- An integrated approach – A more robust integration API enables parcel technology to seamlessly connect with on-premise or cloud-based applications for comprehensive supply chain automation.
- Speed – Processes and order fulfilment can be managed at a much faster rate and eliminate processing errors.
- Visibility – A cloud-based solution that is integrated with multiple partners can store all transportation-related data in one central location, creating better visibility and impeccable customer service.
With that said, a cloud solution can achieve an even higher level of benefit if it embraces a more modern approach to the supply chain, moving away from a traditional logistics model and embracing a global trade network (GTN) model instead.
The technology of yesterday was on-premise, deployed behind a firewall, which makes participation from the outside world very difficult. Cloud technology does not inherently have the ability to support a GTN. The network needs to be able to flex and adapt to all of the participants connecting through a variety of means. A GTN is a living ecosystem of supply chain partners all connected through one cloud-based technology platform. In this model, the focus is on interactive collaboration among carriers, shippers, forwarders, suppliers, 3PLs, and even customers. It drives a powerful network effect with the benefits of universal connectivity among participants. This connectivity creates a number of benefits to help companies streamline their global supply chain management.
According to Gartner, the demand for big data analytics has been the largest driver of cloud subscriptions. In fact, more than three-quarters of global enterprises will be using advanced analytics to improve business performance in the next five years. Advanced analytics delivered in the cloud can bring value to a supply chain that a premise-based solution cannot.
Organizations should also consider the amount of actionable intelligence the GTN can provide to help make better business decisions. It eliminates black holes and guesswork by providing real-time data on what is happening in the supply chain. The analytics can be used to enhance optimization opportunities so companies can look beyond micro-optimization and expand to macro-optimization within the network.
No matter how it’s deployed, the cloud delivers the benefits of transparency, end-to-end visibility, and the maximum potential from partnerships. By moving away from merely on premise technology that is hard-wired, companies can enjoy the freedom and power of choice. “Living on cloud nine” will have an entire new meaning as these advantages boost productivity and ultimately, have a positive impact on a company’s bottom line.
Doug Surrett is Chief Product Strategist for BluJay Solutions, where he oversees the company’s product convergence and expansion strategy. He has been in the logistics industry since 1988, serving in leadership roles focused on transportation management, warehouse management, operations, and global trade.