December 03, 2016

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, 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.
• 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.
• 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.
• 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.

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


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

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 

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