The cloud’s impact on Asia’s supply chain industry

Asia is a unique region where each country has its own unique culture, customs and network of relationships; including suppliers and partners. Hence supply chains are more complex than their Western counterparts. Put together with higher global volatility, changing customer demands and uncertain market conditions, Asian businesses need to be able to streamline operations across borders better.

For an industry and region where collaboration and visibility is key, cloud computing is a new business model that has the potential to transform supply chain management. However, it has yet to take off in supply chain management. Research by IDC reports that globally only 20% of manufacturers, process agents and retail businesses use cloud computing and one can expect this figure to be even lower for Asia. In the same research IDC states that 75% of the companies surveyed are asking for or researching for alternate cloud solutions and project a growth rate of at least 7% for 2013.

What is driving supply chain professionals to the cloud model?

1.       Cost savings

Cloud computing offers an alternate method of deploying supply chain solutions. The most obvious benefit of adopting cloud computing solutions is the cost savings from deployment and ease of speed at which a solution can be set up. Unlike in legacy systems, either custom – built or packaged software, there is no IT infrastructure to set up and maintain on premise, no upfront licensing fees, and no software programs to install and maintain. The company saves on integrating costs as internal departments, partners and suppliers can also link up through the cloud, giving them a much quicker return on investment.

Companies are not dependent on limited IT resources, or bottlenecks and can deploy and implement supply chain solutions on-demand at a much-reduced cost and also scale at will. For example, if your business opens a new warehouse, you can immediately scale your existing solution to incorporate the new warehouse without having to set up IT infrastructure.

2.      Agility in a period of volatility

Many cloud – based solutions are architected to be configurable in anticipation of business change. Research shows that solutions built with modern SaaS technologies can be modified for less than 20% of the cost it would take to modify a legacy application, and in a shorter time frame. Cloud models can be deployed or scaled up and down easily, offering access to key personnel across borders immediately, making the business more responsive to react to changes in today’s volatile business climate.

Another key benefit with cloud computing is the flexibility it gives companies to experiment with new products and solutions as the up-front costs are very low. Cloud computing will help accelerate the pace at which new revenue – generating products and services are introduced into the market, giving early adopters a competitive advantage.

3.       Collaboration through shared visibility

Supply chain visibility has been an industry goal for over a decade and until recent technology development, it has been difficult to achieve. For example, a shipper may need to connect to hundreds of trading partners; many of who did not have the capacity or budgets to interface supply chain solutions with other companies.

Now however, a cloud computing supply chain solution changes the business model. It amplifies the access to systems, people and information, allowing data to flow clearly and quickly within a company and between its networks of vendors. It decentralises supply chain management while at the same time making the supply chain more intelligent. Having information on the go and the ability to act on it makes cloud computing a key differentiator to make the supply chain more competitive.

Research by Accenture has found that supply chains in Asia have higher comparative costs – 30% to 50% more than Western counterparts on average. This is due to higher fixed costs, duplication of assets and infrastructure across countries, and inefficient operational procedures. Cloud computing will provide greater visibility in spotting weak points in the supply chain.

Challenges in APAC

Cloud adoption for the supply chain is low in the Asia Pacific due to a ‘wait and see’ mentality as businesses establish what the best way to move forward is and wait to leverage on their Western counterparts’ experiences. Many distributors and partners still use manual or very basic systems and are more hesitant to change. Common concerns remain about control over the data, security of information and the possibility of service disruptions.

These are accentuated by the fact that network infrastructure is still in the development phase in Asia Pacific, which may restrict access to information from rural areas; especially when goods are moving from location to location. As the strength of the network improves, cloud deployments will increase.

Thomas Halliday is general manager at AEB (Asia Pacific)