History has taught supply chain management organizations one common factor: failure to adjust to societal changes will contribute to business-downfall. In the modern, digital world, the impact of the cloud can be felt in every facet of existence, not just commerce. Cloud computing technology has allowed supply chain management providers to take advantage of a new era of processes, specifically those relating to the ethereal space. Traditionally, supply chain management has relied on physical, in-person processes. Take a look at how cloud computing technology impacts supply chain management concepts.
Previously, analysis of data gathering required both a data entry clerk and a person to conduct data analysis. The cloud, in conjunction with the Internet of Things, has enabled rapid collection of data from various resources and analysis of this data. As a result, businesses can eradicate these former “human” positions in favor a service that performs the same results one an exponentially faster scale. Ultimately, this allows the business to make better decisions for how daily activities behave.
As more businesses have accessed supply chain management providers, a great deal of platforms have been created to facilitate this change. Unfortunately, many of these platforms do not coexist well with one another. The use of cloud technology enables multiple platforms to work with one another through a series of standardized protocols. Therefore, the previously existing digital boundaries between rapid communication and order fulfillment become nonexistent. An example of such binding technology is FlashTrac, Flash Global’s proprietary supply chain management integration system.
In close relation to integration of systems, cloud technologies remove physical and political boundaries from the supply chain management perspective. Since many cloud hosts rely on common practices for accessing, storage, and retrieval of cloud data, the same information may be altered from any place on the globe. Furthermore, cloud technology allows for the dissolution of political debates between business practices; although, the rules of governing entities may have the capacity to limit Internet access, such as was seen in Egypt in past years.
Since cloud hosts have to abide by strict government and public perception standards for maintaining privacy, such as medical and financial data, cloud technology brings state-of-the-art security measures and practices to the forefront of supply chain management. Interconnectedness allows for massive security monitoring and implementation across all cloud-based digital planes while still maintaining communication and enhancing the flow of business practices.
Agreements with cloud providers allow supply chain management providers to eradicate the need for extensive in-house IT departments; although, some minimal in-house IT departments are usually retained for in-house physical IT needs. When in the business of using digital resources, such as those used for e-commerce, a business needs to ensure customers can resolve problems with their system at virtually any time. Therefore, most cloud hosts offer 24/7 support for those using their services, which can be rerouted to correcting issues with your customers without your input if you prefer.
US manufacturing is no stranger to the damaging effects of market volatility. Less than a decade ago, the US saw the worst economic collapse since the Great Depression, and supply chain management providers must always be wary of how resources will be used in the event of a collapse. The use of cloud technology provides a buffer against market volatility. Essentially, partnerships between a supply chain management provider and a cloud host are subject to renegotiation, or even cancelation, if the market suddenly declines. As a result, the supply chain entity is able to minimize associated costs with the collapse and maintain service at competitive rates.
Since cloud technology insulates supply chain management providers from market volatility, it can also be used to achieve rapid scalability. As a budding business begins to experience higher demand for product, the respective supply chain management provider may need to increase production by factors of five, 10, or more. With each additional order comes the strain of extra bandwidth and processing capability, which cloud technology provides. Within minutes, a supply chain management provider can extend the terms, or services, with the respective cloud host to account for the instant growth in capability. Furthermore, the use of cloud-based analytics allows businesses to isolate key inefficiencies within the order fulfillment process, which will further grow the respective business.
The greatest benefit of cloud technology on supply chain management providers is reduced operational costs. Throughout the supply chain, cloud technology can reduce the amount of workers needed to perform specific tasks. For example, the cloud could be used to automatically generate a report of needed product at a specific warehouse, trigger the respective shipment, and account for the product when received at the destination. As a result of minimizing human-input within the order processing, those employees may be then reassigned to other physical aspects of the supply chain. Additionally, supply chain management providers reap the benefits of lower security, IT, data analysis, and more.
As society becomes more dependent on the cloud, more supply chain management providers will come to recognize the role of the cloud in today’s supply chain. When comparing traditional supply chain benefits and processes to the last benefit of cost reduction alone, the lower cost of using cloud technology could easily make up for any potential problem encountered within traditional supply chain management processes.
When someone hears the company name “Walmart” several things come to mind from a pop culture standpoint. From the bullying of getting small town business out of business, to the famous “People of Walmart,” to the genearl low approval rating by consumers. However, one thing that should come to mind is the prowess of the retail giant’s supply chain excellence. Walmart would not have the ability to provide such low prices and have consistent inventory in the over 5,000 stores in the United States and over 1.3 million employees without a focus on good supply chain management. This “invisible” part of Walmart’s business is a logistical and supply chain management and the practices they employ should give supply chain managers pause to take a bit out of their day and inspect what Walmart is doing in order to mimic into the supply chain manager’s own practice.
Not only has Walmart excelled over the decades in traditional supply chain management but with recent news as of late, Walmart is also focused on continuous improvement by investing more into emerging technologies to capture more of the e-commerce market as well as a focus on sustainability.
When it comes to e-commerce initiatives by Walmart, the Wall Street Journal recently wrote:
Wal-Mart Stores Inc. is one of a growing number of big-box retailers building out their supply chains with distribution centers designed to meet the demands of online shopping. The company expects to open four such giant facilities this quarter, as it aims to triple online sales by 2018, to $35 billion from $12 billion last year.
And on the subject of sustainability, SCDigest.com covered Walmart’s 2015 Sustainability report:
Walmart, the world’s largest corporation, is fresh out with its 2015 sustainability report, the eighth such document it has produced.
The 2015 document is quite remarkable, with Walmart more aggressively than ever redefining its corporate mission from delivering quality products at everyday low prices to making the world itself a better place, in almost missionary terms.
“For years we’ve also been thinking in broader terms about what an item actually costs society to produce and deliver – from the bottom to the top of the supply chain – the “true” cost of a product.” Walmart states early on. “The net true cost considers issues such as waste-to-landfill, greenhouse gas emissions, economic mobility, worker safety and food safety. These are all examples of the effects production may have on the environment, in local communities, or on the people who grow and make what we sell.”
It adds: “We believe a business should strive for not just the lowest prices, but the lowest true cost for all. Low prices benefit customers, but low true costs benefit everyone.”
As an example of this change in tone for 2015, Walmart says one of its missions is to create “economic opportunity for our associates, suppliers and people who work in retail and retail supply chains beyond Walmart.” Yes, Walmart now is taking on the task of improving the lives of retail workers generally, whether or not they are employed at Walmart or some other chain. It says it will do that by “clarifying retail career paths, better pre-employment training, more innovative and relevant on-the-job and supplemental training and credentials that employers will accept for advancement.”
Riding a rising five-year trend, retail juggernaut Walmart® grossed $476 billion in the fiscal year that ended in January 2014, up from $408 billion in fiscal 2010, according to The Wall Street Journal’s MarketWatch.
Put another way, Walmart’s revenue comes to 81% of what the National Restaurant Association says the entire U.S. restaurant industry made in 2013.
That income was generated by more than 4,100 stores and fed by a sprawling supply chain, ranked 14th in 2014 by research and analyst company Gartner. Walmart has held a place among Gartner’s top 20 supply chains since 2010.
In detailing its 2014 rankings, Gartner called Walmart a “perennial supply chain powerhouse” and said the company that the National Retail Federation ranks as the world’s top retailer in 2014 based on global sales has a “mature supplier collaboration process” supported by technology.
Walmart uses its mammoth purchasing power to shape suppliers’ behavior which also drives down costs, Gartner said.
The evolution of Walmart’s supply chain includes three elements, according to a 2012 article from Arkansas Business: distribution practices, operating its own fleet of trucks, and technology.
Benefits from its supply chain efficiency result in time savings, more cost-effective inventory management and improved product forecasting, the article said.
The retailer started dealing directly with manufacturers in the 1980s, giving suppliers the job of managing inventory in its warehouses, the Arkansas Business article said. The result was something called vendor managed inventory, or VMI, that smoothed irregularities of inventory flow which helped ensure products were always available on store shelves.
The process involved cooperation and collaboration with suppliers that produced a more efficient supply chain with technology connecting everything.
Walmart was tapping technology even before it developed VMI when in 1975 the company started using a computer system for inventory control in its distribution centers and warehouses, according to a timeline of Walmart’s history from Supply Chain Digest.
Walmart’s inventory management now funnels information from stores such as point-of-sale data, warehouse inventory and real-time sales into a centralized database. The data is shared with suppliers who know when to ship more products.
By 1987, Walmart had its own satellite system that allowed voice and data communication between all segments of the company, according to CIO Online, a website for chief information officers.
By 1989, Walmart saw the benefits of its supply chain management when its distribution costs were 1.7% of its sales, or less than half Kmart’s cost and just under a third of what Sears was spending at the time, according to Arkansas Business.
Walmart’s SCM process is not based entirely on technology. The company has a sprawling network of nearly 160 distribution centers covering almost 120 million square feet and all within 130 miles of the stores it supplies, according to MWPVL International, a supply chain and logistics consulting company. About 81% of Walmart merchandise passed through those centers in 2013, the website said.
The retailer also instituted cross-docking at its warehouses, a method that moves inventory directly from arriving or departing trucks. Products are taken from an arriving truck and packed in a truck bound for a store without lengthy storage in the warehouse, said inventory management software company TradeGecko.
The result is lower costs for inventory storage, reduced transportation costs, and products spend less time in transit, TradeGecko said.
Walmart also uses its own trucking fleet and drivers, maintaining high minimum standards for its thousands of drivers, including three years and 250,000 miles of driving experience and no preventable accidents in three years, according to TruckersLogic.
Walmart’s overall methods of supply chain management differ little from the main components of most supply chains: purchasing, operations, distribution, and integration. But the retailer has refined the methods.
A supply chain begins with purchasing managers who determine which products will sell, find vendors and arrange deals for the products.
The operations portion of a supply chain focuses on demand planning, forecasting, and inventory management. Forecasts estimate consumer demand for a product based on historical data, external drivers such as sales and promotions and changes in trends or competition.
Demand planning is used to create accurate forecasts, a critical step toward effective inventory management. Forecasts are compared to inventory levels to ensure warehouses have enough, but not too much, inventory to meet demand.
Moving the product from warehouses or manufacturing plants to stores and ultimately to customers is the distribution function of the supply chain.
Supply chain integration connects the flow of work and information among all links in the supply chain to maximize efficiencies.
For Walmart, its SCM methods yield lower costs for products and inventory, better control over selection in its stores and the ultimate result of lower prices that can be passed to customers, TradeGecko said.
This research has been done on behalf of the University of San Francisco Online. Any names, logos, and other trademarks that have been referenced belong to their respective trademark owners, who are not affiliated with, nor endorse or sponsor, the institution, its programs, or its materials.
Editor’s Note: It is clear from several articles around the Skills Gap that we need programs that keep the next generations interested in one of the most vital parts of business today: mastering the supply chain. It is proven time and time again that those companies who master all of the chains in the many faceted practice of supply chain management have a competitive advantage. The following post is a guest post from the H.H. Franklin Center for Supply Chain Management at the Martin J. Whitman School of Management at Syracuse University. We are lucky to also feature the great supply chain of Staples, who recently purchased Office Depot. Students were able to work on 2 great proejcts to learn real world practices in the supply chain. Almost like an apprenticeship, these hands on experiences will make all the difference as they graduate and go to find jobs. A good supply chain run by well taught and smart future generations will benefit us all. We hope you enjoy!
The H.H. Franklin Center for Supply Chain Management at the Martin J. Whitman School of Management at Syracuse University is collaborating with Staples, Inc., in the first of its kind relationship to bring innovation and new research to the supply chain field.
The collaboration will allow Whitman School supply chain faculty and students to analyze two initiatives. In the first project, Whitman faculty and students will analyze fulfillment operations and make recommendations regarding how Staples can further improve its inventory and distribution decisions.
“Staples already has an excellent distribution system, with the capability to deliver next-day to 96 percent of the United States’ population,” said Burak Kazaz, PhD, executive director of the Center, The Laura J. and L. Douglas Meredith Professor of Teaching Excellence and associate professor of supply chain.
Whitman faculty and students will analyze big data on customer orders and make adjustments in inventory deployment decisions to create further efficiencies. “Improving supply chain operations in an already highly effective system are a daunting task,” Dr. Kazaz said.
In the second project, Whitman faculty and students are developing a new risk assessment methodology in order to assess the risk exposure in the entire Staples supply chain. The work brings out a new perspective in supply chain risk management. The end result of both projects will be presented to senior Staples leadership at the end of the engagement.
“The H.H. Franklin Center for Supply Chain Management prides itself on its cutting-edge approaches to education,” said Dr. Kazaz. “This collaboration not only provides a unique, real-world consulting experience for our students but also will contribute greatly to Staples’ body of supply chain knowledge and to help make better business decisions. It’s the best of all worlds.”
“Programs like the H.H. Franklin Center for Supply Chain Management and the work it is doing on behalf of Staples advance the thought capital of the supply chain profession,” said Don Ralph, senior vice president, supply chain and logistics, Staples, Inc., and a previous winner of the Syracuse University Whitman School of Management Salzberg Medallion, awarded for excellence in the field of transportation and supply chain management. “Staples is supportive of the learning opportunities this engagement will provide to the next generation of supply chain professionals and sees real value in bringing a fresh set of eyes and new ways of thinking to our data analytics and risk management planning.”
“We think relationships, such as these, are the wave of the future for business programs,” Dr. Kazaz added. “The experiential learning opportunity allows students to solve real business problems to help corporations meet challenges. This makes our students more marketable when they graduate and it helps corporations find their next leaders.”
The Whitman School is home to the nation’s first supply chain management program (SCM). A specialization in traffic and transportation was first offered in 1919 when the School of Management was founded. Currently, the SCM program offers rigorous PhD, MBA, MS and BS degrees as well as executive education. Whitman’s award-winning SCM faculty is renowned for teaching, research and outreach partnerships. The program has evolved into one of national prominence with recent rankings by leading organizations and mediums including Gartner (2014 and 2011), US News & World Report (2012) and Bloomberg Business Week (2011).
To subscribe to our blog, enter your email address below and stay on top of things. We'll email you with a confirmation of your subscription.