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Can the cloud sustain your supply chain?

Considering cloud-based SCM

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Can the cloud sustain your supply chain? It’s not a yes-or-no question – instead, the question of whether to start a cloud migration must be answered with who, what, when, where, why and how.

“A lot of companies know that they need to do something about cloud migration, but they’re asking: What should we do? Is it the right time?” said

The answers may be hard to discern, but your vision guides you.

If you envision a supply chain that is more flexible, efficient, scalable and easier to maintain, then cloud-based supply chain management (SCM) might be your answer. A cloud supply chain management (SCM) implementation often helps companies streamline their processes and stay up-to-date with integrations, automations and new capabilities.

Gayle Brim “A lot of companies have supply chain systems that are limited in their support, their capabilities and their flexibility to ramp up and down”
Gayle Brim
Grant Thornton Business Consulting
Managing Director
To ensure a successful SCM cloud solution, you need to map your destination – but you need to start by asking “who, what, where and why” are we migrating?

Some companies are moving to the cloud as they lose support for their legacy systems – and that pushes them to perceive the limits of their legacy systems. “A lot of companies have supply chain systems that are limited in their support, their capabilities and their flexibility to ramp up and down. With cloud, you can make quicker shifts in your thinking – and, in certain industries, you need to move more quickly. For example, in the high tech industry, it's a matter of time to market. You have to move quickly, and customers are demanding more,” Brim said.

So, what is your vision, what are the cloud options and how do you take your supply chain to the right destination?

Understand your options There are three general options for your cloud-based SCM solution, depending on what aspects of the solution reside in the cloud:

  • Software as a Service (SaaS) provides applications in the cloud (also called “cloud application services”). The applications are managed by third-party vendors. This is the most common option for cloud solutions.
  • Platform as a Service (PaaS) provides a framework in the cloud. Your developers can use the framework to create customized applications or integrations between solutions. The servers, storage and networking can be managed by your enterprise or by third-party vendors.
  • Infrastructure as a Service (IaaS) provides an infrastructure in the cloud, using system hardware at a remote site. Your team can access and monitor this self-service infrastructure, and your enterprise can scale resources on demand instead of buying and maintaining hardware.

Options for “who, what and where” To choose the right option, you need to answer the “who, what and where” of your cloud migration. By determining who will manage what aspects of your system, you can determine where those aspects should reside:

Can the cloud sustain your supply chain?

An SCM solution can cover just one area, or several (such as procurement, inventory, logistics or manufacturing). It can even cover just part of an area (such as vendor management, requisitions, purchase orders and sourcing for procurement). When a solution integrates with suppliers or customers, it can become more robust and complex. An SCM cloud migration can be an opportunity for you to determine which pieces of the supply chain you want to migrate, and how those pieces might benefit from the cloud solution.

Considerations for “why” The “who, what and where” of cloud options often define the reason “why” an organization will move its SCM. But, as you consider your own reasons, be aware that there are unique considerations for SCM systems:

  • Consider taxes, fees processing and other overhead that are part of your supply chain. Envision the most efficient process flow, sequence and timing, then make sure that your system supports it. “You want to set up your system to minimize tax complications or costs when moving inventory or selling across international borders,” Brim said.
  • Manufacturers should remember the shop floor, and be aware that shop floor systems like supervisory control and data acquisition (SCADA) may not be advanced enough to continue production if connectivity is lost. Also note that most legacy programmable logic controllers (PLC) don’t have processing power to house built-in security capabilities, which means increased vulnerability. So, it’s important to understand this and be careful about integrating these systems with any cloud-based functions.
  • Consider your cloud needs before your cloud providers, because many cloud solution providers structure their solutions in a way that can be empowering for some supply chains but limiting for others (especially with regards to integration and processes). Often, it's best to develop a strategy and scope for the first-level processes, then select the solution and align your more detailed processes with the solution. These "out-of-the-box" processes are often based on best practices, and this approach helps limit customization.
  • Consider the scale of your transaction volume and your supply chain network. Note that cloud-based warehouse management systems might not be able to support processing more than 10,000 transactions per day. In terms of your supply chain network, find a solution that lets you ramp up and down, as needed, in the future. If you are a mid-size business, choose a provider that will give you the attention and support you need in a timely manner. Service level agreements (SLAs) with your provider and other vendors will give you a chance to specify the support timelines and resources that might have been yours to dictate (and provide) when planning for an on-premise solution.
  • Plan for updates and integration with other parties or potential parties in your supply chain. Cloud providers push out periodic feature and operational enhancements. This is a benefit of a standard cloud solution, but you will also need to plan and test enhancements before rolling them out. Make sure you have the IT expertise and business user support to do this. Also, consider a system that helps you not only implement current processes but also keeps your options open for integrating potential partners.

Keep in mind that your first step isn’t your final destination. Once you understand the options, you can create a roadmap to illustrate how and when you’ll arrive at the solution.

Map your destination If you determine that the cloud is the right destination for your SCM, then you need a roadmap that tells you how and when to get there.

This strategic roadmap begins with an understanding of the current system – what are your greatest pain points or challenges, and are they unique to you or common to your industry? What are your positive differentiators, and how does your supply chain factor into them? Finally, what is the culture for change within your organization and how can you plan for a successful system adoption?

In general, cloud solutions do not allow as much customization as on-premise solutions. And, the more you tailor a cloud solution (such as through extensions and integration), the more challenging it will be to take advantage of the new integrations and other features that the solution provider rolls out in the future. At the same time, a “product slam” cloud solution that is simply implemented without enough refinement might not achieve user adoption. “I’ve seen a lot of companies who said ‘Yes, we slammed it in, but we don’t really use it, because it’s not effective for us or it’s missing some pieces," Brim said. “The big decision for the strategic roadmap is to determine which pieces and parts are truly unique and critical to the business, and where the business can live with compromises and leverage a standard integrated process,” Brim said. By evaluating your current situation, you can answer when and how to migrate the pieces on your strategic roadmap.

A map for “when and how” To help develop a strategic roadmap for your SCM cloud migration, follow these steps:

  1. Complete a process evaluation
    Brim said, “At the front end, you should do a process evaluation – you don't want to go down into the software layer, because you're not going to truly customize your cloud software, but at least define which business process or processes you need, look at the software and weave them together. That way, you're beginning with the end in mind and getting everyone's buy-in, too.”
  2. Create a cloud blueprint to determine the level of modernization needed and the pre-implementation workstreams for:
  • Process: identify key areas in need of improvement or reengineering
  • People: determine organizational readiness and stakeholder investment for the future state
  • Organization: challenge or optimize the operating model where needed
  • Technology: complete a software evaluation and selection
  1. Complete an initial implementation to jump-start the long pole workstreams
  2. Implement the solution
  3. Stabilize and optimize – the journey doesn’t end when the system goes live

Integration is your destination Whatever cloud model you have in mind, you won’t truly reach the destination until you integrate the new system with your daily processes, your internal users and your supply chain partners.

That’s an important goal to set up front, because it needs to be part of the cost and time estimates for the overall migration. With on-premise systems, companies were quicker to understand that new software was going to require installation, configuration, training and support. With cloud solutions, it’s easy to think that the system will be ready and intuitive once you have access. And cloud vendors sometimes present estimates that only include the technical launch of the new system. However, even cloud-based systems need to be integrated into your business before they can achieve user adoption and provide returns on your investment – especially since most cloud migrations include changes to existing processes.

With cloud solutions, it’s easy to think that adoption and integration happen naturally, or in the cloud – but that’s one task that always stays on-premise. And that’s why it’s so important to start your roadmap with a process evaluation and pre-implementation blueprint before you start to move your SCM. Then, you'll be able to follow much of same map if you need to migrate additional components of your SCM to the cloud over time.

Make your move Cloud migrations can be risky, especially for SCM. “It's usually a bigger process for a company to shift their supply chain solution than it is to shift financials or HR – something that might stand alone,” Brim said. Supply chains are often core to the purpose of the business and tightly integrated both internally and externally. “For example, for manufacturing, it’s often about creating what you're selling. It's creating your own product, or your revenue stream.”

But, once you answer the “who, what, where, when, why and how” of SCM cloud migration, you can form a roadmap that takes you to the right destination – at the right time.

Contact:

Gayle BrimGayle Brim
Managing Director, Business Consulting
T +1 312 602 8394