Key to Supply Chain by HCL

Cloud: Key to Supply Chain

Purpose

The purpose of this white paper is to bring attention to the prevailing SMEs and mid market enterprises about cost effective Supply Chain solutions that help them to manage day-to-day operations and processes efficiently. The proposed solution, at the same time, also provides the needed insight and intelligence to successfully adapt to fluid business environment, and ensure compliance with regulatory requirements.

Introduction

Small and medium enterprises (SMEs) are in difficult quandary in today’s exigent economic environment. It’s no more business as usual; companies struggle on how to optimize for today, and get on track to capitalize on new opportunities that will emerge as the economy grows. They need business solutions to help them to manage more efficiently day-to-day, and also provide them with the intelligence they need to move the business forward.

This is the time when companies need to understand their supply chains better. Supply chains over the years have become lean as a result of cost cutting exercises performed. Result: there is negligible scope of coping up with variations in demand or with unexpected events. The recent crisis over Europe because of Volcano eruption in Iceland actually demonstrated this at a global level. So, companies in future need improved visibility in their Supply Chains. This requires two things, on one hand, development of a “collaborative sourcing” approach, and on other, establishment of an infrastructure allowing the exchange of information across the supply chain ecosystem.

As SMEs evaluate different options, total cost of ownership (TCO) is often top of mind. Many customers have become interested in how cloud computing or software-as-a-service (SaaS) can help lower their costs by eliminating upfront capital investments, very unpopular these days and ongoing maintenance costs associated with on-premise solutions.

SME and mid-market organizations need solutions that enable them to meet their business goals, and also help them to conserve capital and reduce ongoing costs. For many customers, cloud computing business solutions can help organizations to achieve these requirements, and provide added flexibility to scale as business demands require.

Cloud computing essentially eliminates the need for customers to buy, deploy and maintain IT infrastructure or application software individually. Regardless of the application, the cloud computing vendor takes responsibility for all of the infrastructure required to run the solution-servers, backup, software, operating systems, databases, updates, migration, power and cooling, facility space, etc., and associated internal and third-party staffing costs. Because cloud computing vendors manage all of their customers on a single instance of the software, they can amortize costs over thousands of customers. This yields substantial economies of scale and skill, and lowers the TCO.

Problem Statement

This whitepaper is written with an intention to promote a supply chain business solution for several organizations which are facing challenges in terms of buying, deploying and maintain IT infrastructure or application software. An attempt has been made to identify certain business related and technological challenges in subsequent paragraphs.

1. Key Business Challenges

Following report from an Aberdeen survey highlights some of the key challenges from the business angle that companies today are facing.

Business Challenges DescriptionCost to purchase and deploy traditional on-premise SCM solutions

Traditionally enterprises deploy solutions on their own servers, owns the software, bear the cost of hardware, licenses, infrastructure and deployment

Increased supply chain complexity Understanding and managing the drivers of supply chain complexity is important for an organization to progress towards cost effective and optimized solution

Speed of change in supply chain design requirements and network

Today’s rapidly changing economy - rapid price fluctuations, surging oil prices, global competitions and hence, supply chain creates a stress on an enterprise to respond quickly and effectively

Rising customer collaboration requirements

The increase in competition, rising customer expectation and complex regulatory compliance have to be pressed with excellent customer collaboration and document management

Rise in length of IT backlog and time to implement new solutions

There is no SaaS based solution which is end to end, there are piece meal solution such as standalone TMS solution, WMS and time to implement each solution and the interfacing between the same is significantly high

Business Challenges DescriptionRising customer service requirements

Customers keep raising the bar of their expectations as consumers grow richer, are better informed and travel moreFaced with the pressure to raise the Customer Service standard of excellence, businesses are not able to meet the demands

Restricted to single channel fulfillment

Currently, many organizations still have a single channel of fulfillment and are hesitant to move towards multiple channels due to economic pressure

Lack of Inventory visibility and optimization

Poor inventory availability and optimization leads to lack of retail supply chain responsiveness towards short-term demand adjustment

Inadequate order fill rate The unawareness of missing/damaged inventory lead to inventory promising situations and non-fulfillment/delay in fulfillment of the same, which leads to customer dissatisfaction and loss in revenue

Inadequate inventory forecasting Improvements in accuracy mean cost savingsGetting better at anticipating demand and being in the right place at the right time with the right goods and services

Inadequate Returns Management Inadequate returns management drives the management to over invest capital in their business, they try to balance the risk of inadequate returns with the cost of holding capital

Improper warranty management Increased warranty costs and customer dissatisfaction can result from improper warranty servicing

Lack of capability to provide effective value added services

Lack of the ability to budget, account, or charge for the value of services leads to loss in revenue

Issues in tracking inventory ageing Manual operations currently followed does not bring highlights to inventory ageing which can lead to inventory promising situation but un-fulfillment of the same resulting in customer dissatisfaction

Not able to do Drop Ship Lack of effective collaboration between vendors does not bring correct inventory information- which can either lead to inventory promising situation but un-fulfillment of the same or the customer is not promised inventory though the inventory might be available to promise

KPI Analytics Industry standard KPIs like Ontime shipment, Inventory count accuracy , On time receipts, Order picking accuracy etc..define the status of an effective supply chain. A customer might not have analytical capabilities to capture, cleanse and infer these data elements. The proposed solution will provide the customers on demand data elements for these KPIs, enabling them to gauge the effectiveness of their current supply chain and also the corrective measures.

Promotions The purpose of the promotion process is to align and create synergies between systems and people to execute successful promotions and maximize on-self availability. The promotion process involves cross functional working and multi channel communication this makes the execution of the process complex. The intention of having such a structure is to drive sales by increasing the attractiveness of the customer offer. Typical promotional challenges are :Multi channel communication not synergizedNon availability of accurate data (sales trends, demographics etc) for planning a promotional event.

2. Key Technical Challenges

Technical Challenges DescriptionSystem Up Time Uptime is a measure of the time a machine has been up without

any downtime. It is imperative for the proposed solution to have and sustain industry standard up times as this will be a multi tenant solution. Important challenges for system up time are :

o Planning and scheduling downtimeo Reliability Centered maintenanceo Productivity maintenance

Lack of technical support and people dependency

Organizations do not have sufficient product and technical knowledge, have high support needs and bear upgrade costs.

Coping up with System Upgrades Whenever product’s newer version enters the market and it is understood to suit the requirements the better, again huge cost and time is involved in product upgrade

Integrated Solution If multiple applications are implemented as a solution, the integration between the same involves high service cost, integration difficulty, and technical requirements.

Solution

An ideal solution is to provide a secured, managed environment that customers (or groups of customers) can use to perform specific functions. Solution needs to have an option to increase and/or decrease computing capacity in function of the needs at any given moment in time and charging customers on a pay-per-use basis. This is ideal to build a Supply Chain Cloud, which the customers of a specific ecosystem can securely perform transactions, exchange information and analyze it for trends, reports etc. without adding to the TCO.

Supply Chain Management on Cloud

A best-of-the-breed (BoB) standalone solution can be identified in each area to meet the complete end-to-end requirements in supply chain: E-Commerce (Order Capture), Customer Order Management, Customer Relationship Management (CRM), Warehouse Management System (WMS), Transportation Management System (TMS), along with Business Analytics capabilities – all integrated and placed on Supply Chain cloud.

Some of the potential BoB solutions like Manhattan WMS, Red Prairie, Sterling MCF for supporting warehouse management activities, Sterling DOM for Order Management, Google maps and the respective API’s for geocoding and providing the solutions for transport management can be hosted on cloud and the same instance can be used for multiple vendors on a transaction based model.

Small and Medium Enterprises generally do not want all the solutions and each functionality within each solution for their business, they do not want to spend huge chunks of money for the implementation of BoB solutions.

It would be highly attractive to such enterprises to access only the services required by them from cloud on “as and when” basis.

Service Offerings

Apart from the solution on cloud, there can be more service offerings like Process Consulting, Support and Supply Chain KPO as there would be domain and technical consultants available to support the enterprises whenever the business needs them.

Unique Business Benefits

Supply Chain cloud is an attempt to build on customer’s business strategy and lead it to competitive advantage by leveraging IT to drive increased value across the value chain.

1. BoB Scalable & Reliable Solution

BoB Solution under one umbrella Different areas of Supply chain would be catered by best of breed solutions under one cloud and business would be able to access the benefits of each solution, almost with negligible cost as compared with, if business had all solutions implemented on his own hardware. Small to medium sized enterprises would be able to afford the same rich and sophisticated solutions as the multi-billion dollar enterprises.

Solutions Scalable as per the need of businessThe solutions implemented would be flexible to accommodate new expansions/business in a very short span of time.

2. Reduce CAPEX, TCO

Reduce initial investment and TCO.There would be no capital investment in hardware, no software license investment, no infrastructure foot-print which would bring down the initial investment cost to almost 25% of TCO.

Translate user subscription to licensing cost.Monthly subscription fees replace perpetual fully paid licenses, allowing organizations to recapture solution costs through efficiency savings and other benefits as they go.

3. Role Based Access

Granular administration of user and group privileges is very important for internal security and the accounts can be customized to display specific types of data.

4. Seamless Integration

Ensure seamless integration with customers IT ecosystem. Everything is subject to change. Seamless Integration means making a change without error or interruption in service. The enterprise can now benefit from seamless integration of SCM services on Cloud with customers IT ecosystem and a smooth functioning of the overall solution.

5. Subscription Catalog

Catalog with SCM functionalities for a user to choose from.This provides greater and direct visibility to enterprises on communications, solutions and services offered by SCM on cloud. This would make it very easy to look and identify different areas to begin to quantify the benefits of different solution components which will best serve an enterprise.

Conclusion

The importance of on-demand hosted supply chain software delivery model designed and delivered on a Software as a Service (SaaS) is due to its long-term significance

The potential of this technology lies in overcoming the monolithic nature of traditional ERP systems in operation and scale, cloud-based models provides a prospective customer the ability to capture and deliver orders through a globally visible network to ship the product direct to the consumer or retailer.

The timing of this technology is Now, as analysts iterate that emerging supply chain systems are evaluated basis its adaptability to innovative platforms vis-à-vis cost effectiveness. Announcement of cloud computing with particular emphasis on global supply chain as an enabler to bottom the cost-of ownership model would compel any smart organization to leapfrog in their industry using the economic benefits derived from shifting to Cloud as their IT model.