In many ways the supply chain is the perfect type business to adopt cloud technologies. And in fact it may have been one of the first to do so when VANs began receiving, storing, and forwarding the very first orders between trading partners. So is it any surprise that IDC expects taht 80% of supply chain interactions will be cloud based by 2020?
A little history
First there were VANs. Those companies that created electronic networks before the internet became widely available. Their main purpose was to provide connections between trading partners. As part of that service they stored the transactions they received before the trading partner on the other end of the transaction logged in and collected their orders. One of the advantages was that the companies creating purchase orders could upload their entire collection of orders destined for multiple suppliers to a single location (the VAN) where they stayed in mailboxes. The supplier could then open their electronic mailbox and download transactions for all their customers in a single download session.
Today this sounds pretty simplistic but that’s because we have easy, reliable, and cheap access to the digital connections. VANs were responsible for establishing and maintaining the connections. And those connections were not cheap, charging by the ‘kilobyte’ (1024 characters). Imagine your bill today if you were charged for every 1K of data on a 20megabyte internet connection.
The next phase of cloudization developed as VANs and a new breed of providers added services to their networking services. Many of these offered to translate transactions between trading partners eliminating or greatly reducing the amount of expertise and work typically required at each end of the connection. The typical transaction was generated by for example, the customer as a purchase order from their ERP system in the format that ERP produced. Getting the order to their supplier was taken care of by the VAN but then the supplier needed to translate it to a format their ERP could understand. With multiple customers and suppliers exchanging transactions this became difficult, complex, and expensive, not to mention full of potential errors.
The new providers added programming to their services and termed them software as a service (SaaS). Their systems performed the translation between the multiple trading partners and truly reduced the amount of effort required by each trading partner. Along they way these providers added other services, greatly simplifying the way supply chain orders are handled.
The VAN that became SaaS has morphed into Cloud. Granted there are plenty of other software and service offerings that make up cloud computing and many that deliver order processing functions. What’s changed dramatically is the acceptance and use of online services ranging from processing to storage and it’s become moot to describe one as supply chain and another as enterprise software. My estimate is that supply chain use of cloud based systems surpassed the 80% mark a couple years ago and it would be surprising if the overall adoption of cloud based order processing doesn’t hit the 90% mark by 2020 because even placing an order through an online order entry web page or mobile app counts as a cloud based transaction. If your company isn’t using some kind of cloud based process please do let me know.