The day has come. Cloud technology is now mature enough to penetrate each and every sphere of business. Global companies have gained confidence in maintaining their sensitive data in the cloud. At the same time, a growing number of cloud solution providers across the industries are benefitting from the flexibility of cloud technologies to tailor on-demand cloud development services for their customers.
Logistics and supply chain companies are on track to adopt cloud computing in supply chain management, with 50% of logistics service providers already tapping into cloud based logistics and 20% ready to migrate their on-premises solutions to the cloud.
Amazon (Amazon Web Services, or AWS), Microsoft (Azure), and Google (Google Cloud Platform) are the top in-demand cloud platforms. Organizations of various sizes use cloud services from these vendors for data analytics, cloud native development, application migration, machine learning and AI, and other services. Amazon cloud computing currently holds the lion’s share of the global cloud market spanning 99 Availability Zones within 31 geographic regions.
With the flexibility of pay-per-use software maintained and deployed within a reliable cloud infrastructure, logistics and supply chain service providers are able to stay in front of the rapid changes the industry is undergoing.
The cloud will be a basic requirement for delivering customer-centric logistics services in years to come. Moreover, it will help cut IT costs for maintaining infrastructure and setting up solutions and allow service providers to target small businesses who prefer to pay for technology on a subscription basis.
What you’ll find in this article:
- How to overcome challenges of adopting cloud computing in logistics
- Capabilities of cloud computing in supply chain management
- Migration strategies to implement a supply chain in the cloud
- Use cases of cloud based supply chain management solutions
Overcoming challenges of adopting cloud computing in logistics
Companies considering migration of their solutions to the cloud often face common challenges that slow down adoption. Even those who are already utilizing cloud-logistics technology solutions may have doubts about the cloud safety due to potential issues.
For sure, the main concerns related to cloud computing in supply chain management are security and privacy. Many doubts whether it’s wise to use cloud services in light of data breaches, privacy issues, and GDPR (or similar) requirements. IT security departments often choose not to risk it and use on-premises solutions despite the higher price, explaining the cost as an investment in a long-term software strategy.
But disputes with the finance department may arise in critical times when a company must reduce costs by any means, and the decision to switch to a cloud-based instead of an on-premises setup may become the responsibility of the CFO. During the recent COVID-19 pandemic — which has led to a lot of supply chains being disrupted or broken for an uncertain time — most companies that have already adopted cloud based supply chain management solutions are suffering significantly fewer losses compared to those who keep adhering to legacy approaches. The main reason is the transparency and traceability of cloud-logistics technology solutions.
Another solution should be found for volatility and complexity of logistics and supply chain systems. CTOs may find cloud infrastructure attractive for its greater flexibility, shorter time to market, and automated updates compared to legacy on-premises solutions. Last but not least, sales departments will praise the decision to shift to cloud based supply chain management solutions as it opens a huge market of opportunities with smaller businesses that are not financially ready to make investments in expensive all-in-one solutions most of whose features they don’t really need. Moreover, the cloud has proved itself a reliable technology for running operations in manufacturing, facilities, and urban mobility.
The most common and severe challenges of cloud migration in the supply chain
Data migration and security – The most basic thing companies should accept is that a cloud provider’s responsibility is to guarantee a secure infrastructure, which is not always the same as guaranteeing data security. In many cases, data breaches arise because of customers’ negligence or poorly integrated third-party services. Cloud data security becomes the shared responsibility of the customer and cloud service provider, both of whom have to monitor potential threats and establish preventive measures using AI fraud recognition, authentication control, and encryption of critical data assets.
Compatibility and integration – The flexibility of cloud services is one of their biggest advantages. Still, problems may arise if you combine a large number of cloud software modules into one cloud based logistics platform. Another potential issue is related to efficiently integrating third-party services. Avoiding issues with third-party services requires a team with expertise in establishing cloud infrastructure and building a cloud app development platform. As collecting data from different sources becomes a key for logistics providers to saturate cloud based supply chain solutions with data-based insights, providers need to integrate many more services to target specific customer needs.
Performance concerns – Fueling cloud based supply chain management solutions with enormous amounts of data results in a demand for higher performance. Latency in transmitting data to customers and requirements for real-time access to high volumes of data from multiple users leave a lot of room for improvement when it comes to cloud computing in supply chain management. Another related concern is reliable access to data from anywhere, including from places without a reliable internet connection. In this regard, the introduction of 5G and other network technologies will be important for wider cloud adoption.
Capabilities of cloud computing in supply chain management
The complexity of supply chain management lies in cooperation between different stakeholders. These stakeholders could be different departments within one organization or a wider chain of countless sub-vendors, integrated services, and customer businesses.
Cloud environments, which are known for their flexibility, enable previously untapped business models. Logistics as a service (LaaS) is one of them. With LaaS, customers can use only necessary parts of cloud based supply chain solutions or access only critical parts of the supply chain via customizable modules within a cloud based logistics platform. Logistics providers, in turn, get a scalable infrastructure with advanced capabilities for managing cloud computing in supply chains without traditional on-premises development, setup, and maintenance, saving money compared to running one’s own IT infrastructure.
According to the latest data by Statista, the most popular vendor in the cloud infrastructure services market, Amazon Web Services (AWS), controls 32 % of the market. Microsoft Azure follows with 23 % market share, and Google Cloud occupying 10 % of market. Together, these three cloud vendors accounted for 65 % of total spend in the fourth quarter of 2022. According to Gartner Inc, AWS continues to dominate the global Infrastructure-as-a-Service (IaaS) space with a 45 % market share.
The cloud will be a fundamental component to supply chain and industrial transformation. It will not just be for IT cost savings, but a functional requirement of delivering new business and operating models
Top challenges logistics companies face
Source: Capgemini Consulting
Among the biggest challenges logistics companies and their end customers face in everyday operations are transportation costs, business processes, customer service, and supply chain visibility. Most of these challenges can be solved by introducing cloud computing in supply chain management, which provides two types of opportunities.
Supply chain management covers multiple organizational functions where problems may appear at later stages of the delivery process when changes are difficult to make. Controlling supply chains and preventing their disruption is possible for cloud adopters due to increased visibility and the availability of advanced tools within one cloud based logistics platform.The cloud becomes an intersection of various systems that reinforce each other for transparent and effective supply chain management.
Migration strategies to implement a supply chain in the cloud
Cloud migration in supply chain does not always mean migration of all operations. It’s critical to distinguish between the most suitable solutions and processes to migrate first and others to consider migrating later. Solutions that require a high level of customization are less likely to be the first candidates for cloud migration in logistics.On the other hand, solutions that are too complex to use all their functionality at once are best suited to be divided into modules within a cloud based logistics platform.
Cloud migration strategies among enterprises with 1000+ employees
Source: RightScale 2018 State of the Cloud Report
Migration to the cloud also includes choosing a cloud service. Public, private, and hybrid approaches are available. The decision between private and public requires logistics companies to decide on the scope of customization they want in their cloud infrastructure and the logistics solutions they want to deploy within it. Public cloud solutions that limit customization in favor of superior agility, usability, and adaptability are the antidote to complexity; they point the industry toward a future where it can embrace technology innovation without also struggling against complexity.
As an alternative, supply chains can adopt a hybrid approach that unites legacy on-premises systems with functionality migrated to the cloud. To choose between options and successfully implement cloud technology at different stages of the supply chain, logistics companies need to assess all risks and opportunities.
Another option to consider for supply chains in the cloud is a multi-cloud approach that leverages the technical and cost benefits of different cloud environments like AWS, Microsoft Azure, Google Cloud, and Oracle to adapt infrastructure to a particular client’s needs. Still, companies should be careful in adopting this type of cloud strategy as it entails more vulnerabilities and new compliance requirements due to the integration of different systems. Realizing that you should use cloud technology and knowing how to best use it are two entirely different things. That is why relying on a trustworthy technology partner to enable your cloud needs is about an investment in your business resilience.
What does cloud migration in logistics look like?
Planning and preparation. First, companies should choose the most beneficial cloud integration strategy. Two basic methods are available: shallow integration or lift-and-shift cloud integration for migrating on-premises apps and solutions as is, without any server-side changes. Put simply, with lift-and-shift you take an app and move it to the cloud without additional setup. Deep cloud integration requires making additional changes to an app while migrating it to leverage all cloud capabilities. For example, you may consider splitting up a monolithic app into several microservices apps for better flexibility and easier customer access.
Selecting the cloud environment. As we’ve mentioned, you can choose among several cloud scenarios: a single cloud, a hybrid cloud and on-premises solution, and a multi-cloud approach. Based on the cloud services you choose, your cloud environment will look like IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). You also may choose to use the cloud only for database storage or data lakes, particular processes, or testing services.
Migrating and reviewing applications and services. A properly planned migration should not take much time and effort. In the case of migrating small databases, you may use an internet connection to migrate an app to the cloud. Otherwise, you should consider physically transporting servers to your cloud provider if you’re dealing with a massive dataset. To secure the migration process, you must be sure that any data stored temporarily is as secure as it will be on the destination server. After reviewing all migrated data, your focus should be on optimizing resources to realize the cost advantages of your cloud infrastructure.
What supply chain functions are best suited for cloud migration?
- Cloud-based supply chain planning – It usually requires migration of ERP systems with all data which is still rare.
- Cloud sourcing and procurement – This is a largely cloud-tolerant segment that benefits from fast implementation and lower costs.
- Cloud manufacturing – Limited migration is available for supportive software such as for quality management.
- Cloud logistics – This segment is rapidly maturing in its transparency of transportation management, visibility of assets, and data availability.
Use cases of cloud based supply chain management solutions
Observing some of the non-trivial problems of cloud computing in supply chain management, we can uncover all the benefits clouds offer to logistics providers and their end customers. Processing large amounts of logistics data with cloud analytics services helps to prevent risky situations, save costs, and better serve customers.
Use case 1: Avoid damage to products and containers. Cloud-based supply chain management solutions can be used to deal with shipments by different means of transportation including by sea and by truck. Changing the means of transportation increases the risk of damaging products and containers. To solve this complex problem, a cloud can serve as infrastructure for digital twins of containers and products to prepare them for particular transportation methods and find out the exact place in the supply chain where they are damaged.
Use case 2: Avoid delivery delays. A mismatch between the estimated and actual times of arrival can occur due to poor route planning, calculations, and predictions. The reason for this is outdated data and the slow computing power of legacy software. A cloud can unite third-party services integrated for seamless data flows to process data and come up with accurate ETAs, monitor fleets in real time, and give advice for re-routing in case of an emergency.
Use case 3: Ensure reliable delivery. Cloud infrastructure offers a reliable and flexible environment to synchronize tools and services for notifying customers of possible delays due to upcoming road events, optimizing stocks to meet local demand, automating order processing and product call-offs, returning products, and providing customer support.
Use case 4: Perform risk management and analytics. Logistics providers can avoid risks using cloud services by unifying all data across solutions within one cloud-based LaaS platform and monitoring supply chains on custom dashboards.
Use case 5: Provide better customer service. Accessible via an open API, cloud based supply chain management solutions give the ability to integrate logistics services and operations directly into customers’ business systems to plan deliveries, stocks, and customer promos synchronized with all stages of an item’s supply chain.
The future prospects of logistics and supply chains in the cloud
Cloud computing has become a new norm across industries. In combination with machine learning, IoT, and connected technologies, it can bring even more opportunities for supply chains. Limited resources and increased customer demand can be catalysts for cloud adoption. Logistics companies can save costs, time, and efforts on establishing their own IT infrastructure by applying cloud computing to supply chain management. This motivates logistics vendors to tap into new cloud development partnerships to extend their teams with experienced cloud and DevOps engineers.
Embracing DevOps on AWS stretches beyond merely cost optimization for logistics and supply chain businesses. It implicates technology outcomes like timely software delivery, system’s reliability, scalability, top security which in turn leads to improved cross-team collaboration, transportation operations efficiency, controllable asset utilization, predictable supply risks, reduced freight overheads, etc.
Intellias has expertise developing cloud-native environments from scratch, migrating existing solutions to cloud platforms, and optimizing already running cloud applications.
Contact our experts in cloud solutions for logistics and supply chain management to cut your operational and maintenance costs and better serve your customers.
