Supply Chain Technology: There’s power in the cloud
March 01, 2011
Software-as-a-Service (SaaS), now more commonly referred to as “cloud computing,” has a lot going for it. The need for less capital expenditure out of the gate, minimal implementation time, and the fact that such systems don’t require robust IT infrastructures (human, equipment, or otherwise) to run, are the top selling points for these hosted solutions.
There are also challenges to contend with, as we’ll touch on a little later; but it’s safe to say that, at this point in the evolution of supply chain management (SCM) software, SaaS has already made a significant imprint.
Shippers have taken to the SaaS delivery method, which finds software being deployed over the Internet instead of being installed from a box and onto the user’s servers or computers. Using a subscription model, SaaS providers “license” the use of their software to customers who pay low or no upfront implementation costs. That’s because all of the technology resides in the “cloud,” and is accessed via the Internet as a service.
SaaS is being used across many business applications including accounting, customer relationship management (CRM), enterprise resource planning (ERP), content management, and human resource management (HRM). It’s also taken hold in the supply chain space, where transportation management systems (TMS) and global trade management (GTM) systems—both of which rely heavily on collaboration to run smoothly—claim the highest use of on-demand systems.
Over the next few pages we’ll explore just how far SaaS has come in the supply chain software space during the last few years, and then introduce you to a shipper that’s partnered with its thirdparty logistics provider (3PL) to successfully manage its internal and external logistics operations.
Jumping into the cloud
Greg Aimi, director of supply chain research at Gartner, estimates that 25 percent of TMSs will be delivered on demand by 2013, and that the penetration of both the TMS and GTM markets currently stands at about 20 percent. Some of those on-demand solutions are standalone, while others are served up as part of larger solutions developed by companies like Oracle, Manhattan Associates, and Red Prairie, says Aimi.
Aimi says that TMS and GTM work particularly well in the cloud environment because each revolves around “multi-party management” programs that can be fragmented and difficult to manage without a centralized system that all entities can access.
“Transportation involves a lot of working parts, and when you get into the international scene you also have to factor in freight forwarders, consolidators, and multi-modal carriers,” says Aimi.
“SaaS’ single repository system is valuable, and different than traditional software systems that require software installation, servers, hardware, data centers, and the development of [individual] connections with all of the parties who are acting on your behalf.”
Ben Pivar, vice president and North American supply chain lead for consulting firm Capgemini, says that much of the business case for SaaS can be traced back to the packaged software revolution, when shippers realized that software development wasn’t their core competency.
“A similar movement is happening with SaaS, with shippers looking hard at whether they really want to set up and manage hardware and software in-house,” Pivar says. “Through the on-demand model, companies can work with vendors that leverage their expertise across multiple clients, and for a better price.”
SaaS systems also require less upfront investment, says Aimi, although some shippers do question the value of paying subscription fees over the long term, versus writing one check for a professional license. “The initial cost of SaaS is definitely attractive,” says Aimi, “because anytime you have lower capital expenditure upfront, the investment tends to be less risky.”
That selling point has attracted companies of all sizes to SCM SaaS options, which are no longer relegated to budget-conscious shippers who lacked robust IT infrastructures and support systems. Even large corporations like Proctor and Gamble (P&G) are tapping the option, says Aimi, who points out that the consumer packaged goods firm is using a SaaS-based program for its global transportation rollout. “That’s a really big deal,” says Aimi. “You don’t get any bigger than P&G.”
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