Successful manufacturers welcome changes such as the benefits that cloud computing can have on their supply chain.
Manufacturers have been unfairly portrayed as having a fundamentally conservative, “don’t tell me, show me” outlook. That’s surprising, considering the major innovations in production software, the birth of the global supply chain, and dramatic shifts in e-commerce, reverse logistics and business continuity.
No doubt, it was once easy to name profitable manufacturers who could afford to ignore innovation and talk about “the good ol’ days.” These manufacturers were commonly larger organizations. Today, however, thriving and successful manufacturers have embraced change and understand the generational shifts in process and technology they need to make in order to remain relevant, competitive, and growing profitably.
These visionaries, which range in size from the very small to the very large, will continue to set the standard in the decade to come by embracing cloud technology for core business processes including inventory, fulfillment and financials, in the same way that those at the forefront of the quality movement and the global supply chain outpaced the market in recent years.
Head in the Clouds
Doing business in the cloud is really just another way to specialize (what Geoffrey Moore refers to as the Core versus Context analysis), and manufacturers have been trend-setters in recognizing the benefits of specialization since the first assembly lines. The cloud makes it possible for manufacturers to outsource the cumbersome business of caring for software, hardware and associated technology to dedicated specialists who can provide greater uptime at a lower cost because of the economies of scale involved in managing services for tens of thousands of customers at once.
Enterprise-grade cloud providers report and typically guarantee their uptime, and top providers generally provide a service level unattainable for all but the largest IT organizations. Cloud is also a powerful way to outsource back-up, disaster recovery, mobility, internationalization, and access from anywhere for anyone. Oh, and by the way, cloud software offers benefits to the CFO – requiring treatment as an OpEx, not a CapEx – closely aligning costs and benefits.
A common, myopic objection to doing business in the cloud is that it makes a company over-reliant on outside Internet connections. In reality, a manufacturer without reliable and redundant Internet connections is lagging its peers, cloud or no cloud. Are there many manufacturers today who are running their own power grid [primary, not back-up], phone infrastructure, paving their own roads and operating their own water utilities?
Ensuring a constant connection to cloud services is just another component of business continuity planning, no different than preparing for the shocks foul weather, labor strikes or supplier disruption can create. Visionaries already consider continuity planning to be a vital part of their business, so bolstering the “last mile” of their network is a small, incremental addition.
Additionally, the successful manufacturer today is no longer operating just within its four walls, but with multiple locations, suppliers, vendors and customers. All of these interactions mean that the modern manufacturer needs to be even more connected than ever before.
Most manufacturing companies today already rely on a cloud provider for some core activities, including email, business applications or travel. Entrusting real-time operational and financial processes and data to a cloud provider may seem like a drastic step, but chances are any organization healthy enough to be considering its future is already sold on the value of the cloud for key business activities.
A Computer Economics survey of 70 manufacturing IT executives cited integration challenges as their top concern about cloud computing. In practice, the open interfaces and modern architecture of cloud solutions makes them far better candidates for integration with existing systems than another on-premise system with its own proprietary quirks. Factory automation, data collection and logistics have all made major strides in the cloud over the past year, which will only continue as more manufacturers become cloud participants.
The outdated architecture and aging technology behind many on-premise manufacturing systems which have their roots in the MRP systems of the 1960s and 1970s is actually held up as an asset by some when compared to cloud solutions. This argument states that functionality developed over several decades must naturally be more complete than that of a newer, modern solution.
But these on-premise developers are almost always saddled with the need to support multiple versions of their own software, as well as countless combinations of middleware and databases – all distractions which take their eye off the ball of developing new functionality for the 21st century manufacturing industry. Worse, legacy systems are dragging manufacturing companies away from core competencies into a world of self-maintenance, own version control, and costly custom software development. Cloud providers can focus all of their development time and energy on a single, definitive solution, which is why the functionality gaps are rapidly shrinking, even in micro-verticals.
Even more importantly, the instant scalability of cloud computing makes it possible to bring remote facilities and new supply chain partners into the fold much more quickly than an on-premise systems allow. Particularly for manufacturers with an eye on growing through acquisition or international expansion, cloud solutions are a natural choice both to accelerate deployment and reduce overhead.
Ahead of the Game
Nobody can make a serious case for business success by waiting until tomorrow for reports that describe what happened last month. Whether the end product is sneakers or airplanes, remaining competitive in the future requires every company to be more dynamic, more available and more aware of the marketplace than ever before. The cloud provides the real-time capabilities necessary to an adaptable and distributed organization, and visionary manufacturers know they must be both in order to succeed.
Because cloud solutions are often promoted as providing anywhere, anytime access, some manufacturers overlook the benefits because they think of themselves as fundamentally tied to a few large locations. As a result, keeping ERP and other operational systems on-premise and hosted on dedicated servers seemed like a natural extension of the large, fixed warehouse.
That superficial argument once again overlooks the fact that the true visionaries in mobile computing actually come from the supply chain. Mobile devices and iPads may have enjoyed most of the sexy press over the past decade, but the truth is that manufacturers, and in particular wholesale/distribution companies, absolutely led the mobile revolution in the use of handheld, connected devices in the workplace long before texting caught on.
The dirty truth is that no matter whether the manufacturer or a distributor has a single location or a global network of distribution, manufacturing and 3PLs, all modern manufacturing business is global Ð between multi-tier supplier networks to globally distributed customers all business is distributed, the network is the manufacturer.
Roman Bukary is general manager of manufacturing/wholesale & distribution with NetSuite Inc. For more information, visit www.netsuite.com.