Cloud Computing in Supply Chain Management

Supply chain management typically involves supervising the transfer of products and goods, such as from a supplier, then to a manufacturer, a wholesaler, a retailer and finally to the consumer. Cloud computing refers to the practice of using a network of remote servers hosted on the Internet to store, manage and process data, rather than a local server or a personal computer.

Fig 1: Supply Chain Flowchart

The cloud architecture includes a pool of virtualized computers, storage and networking resources that get aggregated and launched as platforms to run workloads and satisfy their Service-Level Agreement (SLA).
Cloud services
The service provider provides the following main services to the service user. These are as follows:
• Software as a Service [SaaS]
• Platform as a Service [PaaS]
• Infrastructure as a Service [IaaS]

SaaS (Software as a service)
It features a complete application offered as a service on demand. A single instance of the software runs on the cloud and services multiple end users or client organizations. The most widely known example of SaaS is salesforce.com, Google Apps

PaaS (Platform as a service)
It encapsulates a layer of software and provides it as a service that can be used to build higher-level services. There are at least two perspectives on PaaS depending on the perspective of the producer or consumer of the services: Someone producing PaaS might produce a platform by integrating an OS, middleware, application software, and even a development environment that is then provided to a customer as a service. Someone using PaaS would see an encapsulated service that is presented to them through an API.

IaaS (Infrastructure as a service)
It provides basic storage and compute capabilities as standardized services over the network. Servers, storage systems, switches, routers, and other systems are pooled and made available to handle workloads that range from application components to high-performance computing applications.

2010-2011	2011-2012	2012-2013
Processes & providers characteristics & examples	Processes & providers characteristics & examples	Processes & providers characteristics & examples
In early pilots SCM using cloud needs innovation and continuous improvement. Testing attitude also needed. Support & administrative processes. These can easily be abstracted and isolated, and do not require complex integration. Examples: • Capability development/training delivery • Simple analytics	This era captures maturing phase, first providers disappears from the market and other invest to grow and improve service offering. Higher focus on core and rather complex processes. Examples: • Pricing optimization • Replenishment planning • Order processing • Transportation load building	Here consolidation phase starts and major player in each category of SCM defined. SCM accept well establish models for usage and payment of cloud based services. Also complex process covered in cloud e.g. requiring collaboration between many entities and tighter integration with other processes and perhaps involving physical capacity constraints. Examples: • Collaborative engineering • Warehousing and distribution of physical product • Reverse logistics/returns processing • Fleet management
User group interests	User group interests	User group interests
Companies with highest pressure for operational excellence and through competition, e.g. Products / Consumer Goods, High-Tech	Broader industry scope, companies with higher integration needs will start using cloud based services as part of their operating model	All industries applied cloud based processes

Table 1: Implementation process of SCM on cloud platforms

SCM Cloud
SCM Cloud offers - “a set of services that provide SCM functions to any cloud user in an efficient, scalable, reliable and secure way”. That is, Cloud masks all the heterogeneities involved in implementing various SCM functions and the tiers within each function and provides a purely functional view rather than having to deal with the inherent technologies. The view of the cloud makes us, the service providers the best ones to take the cudgel to implement the CLOUD. We must therefore prepare a pool of requirements and a pool of plausible technologies and create a layer of abstraction to free the user from choosing packages, best-of-breed solutions, databases, integration middleware, and infrastructure and think only about the required functionality and how much he can/should pay for it. Here is a simplified tiered-illustration of SCM cloud components.

Fig 2: SCM Cloud

Cloud computing is already making a significant impact on the supply chain management application market, and adoption is expected to continue to grow. Companies that provide SCM software applications – including e- procurement, warehouse management systems, transportation management systems, supply chain planning, and business intelligence & analytics – are either already offering ‘software as a service’ (cloud-based) solutions or are articulating a clear strategy to move to such solutions as more customers demand it. As this happens, look for the following supply chain processes to become particularly prominent venues for cloud computing:

Planning and forecasting:
Cloud-based tools are available for capturing itemized spends data, performing basic analytics; planning manufacturing runs and executing statistical demand forecasts. Applications focused solely on retail are also prevalent, with capabilities that include planning & allocation, assortment & space, pricing & promotion, and forecasting & replenishment. A primary reason is that planning and forecasting are rarely core components of companies’ ERP systems. Clients therefore can run on manufacturer’s ERP application, but leverage another’s best-of-breed planning/ forecasting application via the Internet.

Logistics:
Cloud computing applications for functions such as network strategy, inventory management, warehousing and transportation will appear with increasing regularity in the near future. Processes such as global trade compliance, replenishment planning, order processing, and transportation load building, fleet management and transportation route planning are likely candidates. Some basic warehouse- and transportation-management applications are already available online.

Sourcing and Procurement:
Cloud computing represents a great opportunity to reduce ‘total cost of ownership’: the most commonly cited success metric in sourcing and procurement. A key reason is that cloud-based tools are inherently collaborative and accessible – a significant boon to companies that may deal routinely with thousands of suppliers. Take contract management: cloud-based collaboration allows multiple parties to jointly develop supplier contracts. Myriad sourcing and procurement capabilities are rapidly coming online, including procurement report generation, database centralization and supply chain visibility.

The future
Cloud computing in supply chain management is a paradigm that is still in its early stages. Thus it is likely to develop at different paces in different process areas, industry sectors, and markets:
Process areas: supply chains ‘in the cloud’ are likely to initially take hold in those areas that are on the fringe of what many people consider core capabilities. Processes like global trade compliance, transportation route planning, freight bill audit and payment, and even basic product design engineering are all likely candidates.
Industry sectors: early adopters will likely be industries with products
Markets: since supply chains in the cloud will be characterized by a more efficient way to use services, the most likely early services could emerge in countries with less developed infrastructures.
This could be a big boon to companies in Asia as well as to developing economies in areas such as the Arabian Peninsula and parts of Africa, where companies look for ways to leapfrog development cycles and have minimal access to capital

References:

1. Analysis of Supply Chain Management in Cloud Computing by Animesh Tiwari, Megha Jain.
2. Cloud Computing For Supply Chain Management by Harshala Bhoir and Ranjana Patil Principal
3.http://www.forbes.com/sites/louiscolumbus/2014/02/12/where-cloud-computing-is-improving-supply-chain-performance-lessons-learned-from-scm-world/

About Author:
D.Santosh is a PGP second year student at IIM Raipur. He completed his graduation in Automobile Engineering from PSG College of Technology, Coimbatore. He has 22 months of work experience with Mahindra & Mahindra Ltd. He can be reached at 15pgp013.santosh@iimraipur.ac.in. 

Role of Supply Chain Management in Make in India initiative

India is a country blessed by nature in terms of natural resources. It is a source for large number of significant minerals and substances like coal, iron ore, mica, bauxite, natural gas, diamonds, limestone and thorium. India not only has these resources but also tops the ranking list in the world for these mineral reserves. For coal, India has 4^th largest reserves, for bauxite 5^th largest and for manganese ore 7^th largest. Hence as far as raw material strength is concerned, our country has sufficient of it. But still it lags behind a number of countries in utilizing these resources and thus manufacturing.

One of the major reasons being its inability to harness these resources. The factors that make India lag behind other countries include legal rules of licensing, control pricing, currency controlling, labor laws, land rules, environment regulations, poor infrastructure, political barriers and corruption that is prevalent. Although India has a good demographic dividend now but it is expected that population of workers aged 15 to 24 will reduce by 61 million by 2030 in India and other BRIC nations. This again poses a serious threat to manufacturing industry.

INDIA: A Manufacturing Hub?

Make in India, a whimsical step taken by our Prime Minister Mr. Narendra Modi is an initiative taken towards boosting manufacturing in India and increase the contribution of manufacturing to GDP from 15% to 30%. Manufacturing is a very important sector for any country and acts to strengthen the backbone of economy. Encouraging manufacturing in our own country will reduce costs and give employment to our people. Creating more employment opportunities will prevent brain drain as well. Effective supply chain will play a huge role in making this a reality.

Supply chain involves the whole process of converting raw materials into finished product. Each stage requires inputs in various forms and value is being added at each stage and so it is known as Value chain. The value addition incurs costs that result in overall effect on final price. Now if the cost at the very beginning stage i.e. raw material cost is high, the ultimate product costs will automatically rise. The reason for high cost of raw materials is that they are imported from foreign countries instead of being extracted from our own country. Now imagine that not only the raw materials are imported but also the manufactured parts and finished products are imported. Imagine the amount of money that is being flown out of the country for no reason.

Now to “Make in India” there have to be facilities and opportunities equivalent to other developed countries so that the dream of making India a self-sufficient country comes true. In addition to that India also has to overcome the barriers present.

The most important part of excellent manufacturing is well maintained supply chains, but as of now India does not witness a good level of operations management. In India a huge portion of gross domestic product equal to 14% is spent on logistics. 22 % of total sales is caught up in inventories of all the supply chains. Due to inefficient logistic network there is a wastage of 20% in cold supply chains. It is agreed that making development in supply chain in a country like India which is seventh largest according to area, is not that easy but it is not impossible too.

The reason for poor logistics network are numerous and they have been effecting production since ages. There are some geographical disadvantages also. As compared to China, India lags behind by two weeks in shipping line from United States. Indian infrastructure which denotes roads, railways, airports, seaports, information technology (IT) and telecommunications is very deprived as compared with other developed and developing countries. Indian infrastructure is rated 54th among 59 countries in comparison to other developing countries (World Economic Forum, 2000). Only 48% of all villages present in India are connected by roads. Indian railways are rated 25th among 59 nations, World Economic Forum and the quality of airport infrastructure is rated 40th among 59 countries. All these figures tell us that infrastructure of India is not up to the mark of handling efficient supply chains. This results in grave disadvantages in acquiring of necessary materials required especially when companies are planning to get global. Make in India will promote the up-gradation of supply chains in India by strengthening freight network. This is a cycle of improvement that will take place. Due to Make in India campaign freight network will improve and the improvement leads to achieving better results for Make in India. To make this possible government has kept funds for increasing freight capacity by 50%.

Small and medium enterprises hold a very important space in Indian industrial sector as they have been able to perform efficient process of assembling goods in less costs and also maintained the quality standards. There is enough scope of cost reduction due to number of available factors, the only need being to employ them successfully. The reduced cost of logistics will decrease price of goods not only in India but also globally in turn making them more competitive. This will ultimately affect the economy and give us fruitful results being aspired by Make in India. In situations where it is inevitable to import machinery and components there the suppliers should also be asked to import certain minimum amount of components or raw materials from India so that the exchange remains same.

Hence improvements can be done in number of areas to come up with better supply chains which play a major role in Make in India. The focus should be on improving all zones including inventory management, operations and manufacturing. Utilization of latest technologies like radio frequency identification will lead to matching the pace of demand and reducing errors. Information technology and analytics should be utilized vigorously to standardize processes and keep a track of all activities. Internet of Things (IoT) and big data analytics will definitely help in making India’s supply chain competent.

The article is written by Akanksha Rajput. She is a second year PGP student at Indian Institute of Management Raipur