Supply chains go on-demand

When supply chains go down, people don't eat. So it makes sense for all parties involved to use the most advanced tech available. Quocirca's Bob Tarzey explains why the on-demand paradigm suits supply chains so well.

Some things go well together, even if they were not specifically meant for each other in the first place: teenagers and SMS, Apple and music, mums and 4x4s. Today's global economy throws up another such pairing: supply chain management and on-demand applications.

You'll find many terms being used for the latter: on-demand applications, software as a service (SaaS), hosted computing. What we are talking about is business applications running on hardware located in a facility run by an organisation separate from the users of the applications. Let's stick with the term on-demand applications.

In the last five years, the variety of apps being offered on-demand has proliferated. A number of high profile suppliers have emerged including WebEx, with its online conferencing service; Salesforce.com, which started out with CRM but has now created a whole new on-demand platform called Apex; and Google, which made its name in search but is now offering a whole range of on-demand services including office applications.

What works

There are many drivers for the take-up of such services including the switch to a monthly service subscription rather than having to make upfront investments, reduction of management overheads, a simplified user experience and higher availability - all of which can mean a lower cost of ownership over the lifecycle of an application.

Certain business processes have flourished with on-demand and the pervasiveness of the internet to make the applications that drive such processes widely available. A good example is automated supply chain management (SCM): once such apps became available on-demand, supply chain partners of all sizes were able to benefit from real-time co-operation and data-sharing that was all but impossible before.

SCM is as old as trade itself - it has just got slicker over the centuries. Supply chains can be the single most important competitive advantage in certain industries such as retail and manufacturing. Retailers look to offer their customers broader choice, scouring the globe for new products from remote suppliers. Manufacturers look to drive down inventory levels through real-time delivery from their suppliers.

Both have ended up using the supply chain itself as a warehouse, cutting down the need for expensive storage facilities. For example, the food we eat will be in constant motion through the supply chain, from the supplier to the supermarket, ensuring its freshness. And the parts that make up our cars are timed to arrive in the factory on the day of assembly, minimising excess inventory that has to be stored and managed, keeping manufacturing costs as low as possible.

At the same time getting competitive advantage out of the supply chain is getting harder and harder. But there are ways. An accessible SCM system with low barriers to entry and multiple electronic interfaces for participants allows small remote suppliers to be more easily included.

This increases choice and ensures competitive costs and allows for ad hoc relationships between buyers and sellers. Also, a well managed supply chain can ensure goods are transported efficiently, minimising the environmental impact, which is an increasing concern for both governments and consumers.

Why it works

So why is SCM as an on-demand service so good for enabling all this? First, in most cases, whatever organisation sits at the top of a particular supply chain is unlikely to see managing a complex IT system as a core capability (although some of the very largest organisations do) This is a task well suited to being outsourced to a proficient third party with the right facilities, skills and proximity to high speed communications.

But it goes beyond this, especially when you start to consider the other participants - both the grass roots suppliers and the transport organisations that need access to information from the system.

These organisations not only need to be able to communicate with the top of the supply chain but also with each other. When and where do I collect the goods? Who do I transfer them to when I arrive at my destination? How should one container be disaggregated and the contents repackaged for onward transport? What paperwork is required at this border? What language should all the paperwork be in?

Answering these questions and ensuring the efficiency of the supply chain involves thousands of communications by hundreds of individuals in multiple organisations all over the globe. If the supply chain fails, all this breaks down. That's why a resilient and accessible system is required.

This mix of an on-demand SCM service with multiple electronic interfaces is exemplified by the GXS Trading Grid. The availability of such a service has an additional benefit for suppliers who link up to it - having developed the ability to participate in one supply chain, it is easy to get involved in a second, third and so on.

Highly available supply chain systems that are easy to access by thousands of participants using multiple standards are not a core expertise of most retailers and manufactures - providing such systems is a job for specialists like GXS.

Whoever owns the system - whether retailers or the suppliers - a supply chain is not for the sole benefit of any one company but serves a wide community. If the supply chain application fails, the community does too. Best left to experts, a supply chain system must always be there - on-demand.