Cloud is changing the way supply chains operate
Cloud computing has gone mainstream in today’s organizations, and many are adopting a cloud-first IT strategy. While enterprises still direct significant amounts of money towards on-premises—or off-cloud—software, that spend is decreasing while the pace of cloud adoption remains high.
To elaborate on the speed, scale and diversity of the cloud market, according to Gartner, worldwide spending on public cloud services is expected to grow by 20.7% in 2023 compared to 2022. The overall market size will increase to around $592 billion, of which software-as-a-service (SaaS) will account for around 33%, infrastructure-as-a-service (IaaS) approximately 25%, and platform-as-a-service (PaaS) around 23%.
Cloud is the #1 technology driving change in the supply chain
Cloud adoption impacts all parts of the organization, but due to the unprecedented levels of disruption over recent years, supply chains are one of the fastest changing areas. A recent report by IDC, sponsored by OpenText, surveyed over 800 supply chain leaders to get a sense of their digital supply chain maturity and the related drivers and barriers. The survey found that cloud is the number one technology they expect to impact their supply chain—and by a clear margin.
67% of organizations said that cloud will likely change how they integrate and execute their supply chain. Artificial intelligence/machine learning, the second-most impactful technology on the list, was selected by just 44% of respondents. The results were consistent across industries, although the difference was more pronounced in retail, high tech and manufacturing, whereas the gap in life sciences and consumer goods was narrower.
Cloud solutions benefit supply chains in several ways
To elaborate on what makes cloud such a transformational force for supply chains, the IDC report explored the benefits reported by organizations from using cloud-based solutions. The greatest benefit was improved supply chain visibility, followed by improved data sharing and the ability to receive ongoing updates for the applications used.
Other benefits also received high scores, and due to the relatively small differences between the various benefits, the top three varied somewhat between industries. Improved visibility was the top benefit in manufacturing, high tech, transportation & logistics, and retail. In consumer goods the top scoring benefit was improved data sharing, in life sciences it was more robust data security, and in automotive it was ongoing application updates.
Cloud adoption impacts supply chains operations
Based on the key benefits reported by the supply chain leaders, increased adoption of cloud technologies has three important implications on supply chain operations:
- Ecosystem collaboration deepens. Cloud helps organizations collaborate more effectively and with greater insight across their supply chain ecosystems. When more information is exchanged across the network faster, organizations can better anticipate disruptions and mitigate their impact, increasing both the resilience and agility of supply chain operations.
- Governance is improved. Gaining better visibility into the supply chain through cloud solutions helps organizations better identify and manage issues with compliance across different areas such as sustainability, reporting requirements and data protection. It also improves vendor management and helps mitigate operational risks through improved process quality and faster response times.
- Technical capabilities evolve. Cloud technologies offer many benefits for supply chains, including greater freedom around choosing applications that meet specific business needs and not worrying about application upgrades. It also delivers the ability to access applications and data anywhere at any time and a high degree of scalability. However, cloud technologies also force a certain degree of standardization, which means that companies need to move away from customized features they may have used in the past. Some cloud solutions also guide—and, in practice, limit—behaviors through commercial models, such as pricing for data storage, processing and movement between environments, which must be accounted for in overall solution design and architecture.
Overall, cloud, in its many forms, has an essential role in increasing digital maturity in supply chains and helping them become more connected, agile and resilient. As cloud adoption in organizations increases rapidly, we’re seeing a correlating pace of transformation in how supply chains operate.
- Digital transformations of a broad range of companies
- Regional and industry-specific considerations
- Recommendations for managing the complexity of B2B and supply chain integration for your company