In 2020, manufacturing supply chains across the globe were tested on the limits of their resilience and agility amidst large-scale disruptions. Concentrating production to optimise for costs and efficiency is no longer the only benchmark on which the success of supply chains of the future will depend – in fact, in a May 2020 survey by McKinsey, 93% of executives indicated a plan to overhaul their supply chains. Adding international trade barriers, like geopolitical conflicts and regionalisation to mitigate production blackout risks result in diversification of supply chains and, concurrently, the need to orchestrate manufacturing supply chain management with long-term growth insight.
Last year, Mexican manufacturers surpassed the Chinese to become the US’ top trading partner. Manufacturing footprints and supplier networks, which were previously curated to leverage differing production costs, are now moving closer to their target markets. However, depending on the shape of the pandemic recovery, adaptability will be a crucial element of supply chains that will survive in the time to come. According to a BCG report, supply chain complexity leads to loss of value. Simultaneously, cloud and data-based solutions have helped manufacturers bring their business continuity plans into action, carry out large scale transformations and bring agility and responsiveness to their supply chains. Moving forward, the cloud will be the key to masterfully managing this complexity and turning supply chains into entire value chains for manufacturers. Let’s deep dive into nine such compelling reasons behind this much-awaited massive shift.
Smarter responses to the volatile marketplace
Manufacturers now operate in a marketplace where supply and demand no longer move in identifiable patterns. Add to this the increasing need for customisation across capital-intensive production environments, and a high-precision response to production planning & inventory management becomes critical for staying lean and avoiding loss. Moreover, capturing fluctuations in demand effectively and turning them into growth waves for the enterprise’s bottom line will be a crucial business continuity motive for most. Migrating their supply chain management operations to a data-based cloud platform can help enterprises tackle these challenges by leveraging Big Data solutions that capture every movement within and beyond the enterprise, turning them into high-level insights for cutting-edge decisioning.
The growing need for simplicity and convenience
In an increasingly regionalising production environment, enterprises with a global presence must mask complexity in their operations and manage it effectively to minimise operational hassles. Migrating the supply chain management function to the cloud can help standardise processes, enforce an intuitive and collaboration-oriented end-user experience, enable anywhere, anytime, any device control and embed end-to-end process ownership at scale. This also opens up the possibility of outsourcing supply chain management, which concurrently frees up resources for innovation and scaling up fast. Moreover, building centralised control can help enterprises respond to critical situations and disruptions at the speed of information.
Keeping the costs down
Cloud-based solutions bring a significant advantage over traditional, on-premises supply chain focused ERPs and systems of engagement in the form of minimal upfront costs, zero infrastructure investment and operational variability expenditures, which form the foundation of a lean operating model. With easy upgradeability and subscription-based pricing, cloud applications can help enterprises shift from a capex model to an opex model, thereby simplifying cost-value relations and lifting pressure from the bottom line. Cloud-based supply chain solutions also reduce the cost of staying up-to-date with the technical developments of the ecosystem by releasing new capabilities. Manufacturing enterprises have shown strong confidence in driving cost reductions and bottom-line improvements at the back of cloud adoption.
Driving business impact at scale
Cloud solutions can help align strategy and execution across the distributed enterprise. By seamlessly integrating applications and data from all geographically dispersed sources to a centralised cloud platform, senior management can strategize and create cross-organisational and cross-functional impact and enforce standardisation across processes, systems, regions and people. McKinsey reports that a global electronics manufacturer managed to reduce maintenance costs by 90% with service-oriented cloud architecture, for example.
Cloud-based supply chains support varying levels of digital maturity and scales of operations. By migrating their operations to the cloud, supply chain leaders can efficiently and seamlessly scale up and down, depending on the economic conditions and market trends. This agility will be crucial to surviving disruptions like the COVID pandemic. Many suppliers have gone extinct due to their inability to thrive in the changing market dynamics and fluctuating scales of demand.
Democratising access to insights
A crucial by-effect of migrating supply chain operations to the cloud is extended visibility across the enterprise. By integrating platforms across the enterprise and collecting data from various sources, cloud-based supply chains bring granular, real-time visibility to functions, processes, performance and the extended ecosystem, which feeds into high-precision top-level insights.
Moreover, by leveraging a centralised data repository, cloud-based supply chain solutions can deliver relevant insights to the right personas within an interface that streamlines processes across verticals, supporting demand managers with the correct forecasts, real-time downstream visibility and production capacity over time.
Bedrock of innovation and experimentation
In the race to modernise their supply chain operations using Industry 4.0 paradigms, many manufacturers are running pilots and developing innovative use cases using technical levers that spur improvements. However, only 25% of these pilots deliver impact at scale, while 61% indicate the lack of ROI as a significant challenge in moving past this pilot purgatory. Most lack the infrastructure to implement them at scale.
According to a McKinsey case study, developing an IT platform that supports experimenting and scaling pilots that bring demonstrated value, emerged as a top priority for an automotive supplier. In a digitally hyper-connected mesh, the cloud forms the bedrock of innovation for scaling IoT and AI pilots and implementing them globally.
Increase speed to market
Cloud-based supply chain orchestration can help manufacturers capture demand precisely, even in incredibly fast-moving markets and short production cycles. Increased speed-to-market is one of the top expectations of manufacturers looking to migrate their supply chain to the cloud & rightly so. By applying predictive analytics on data collected from a variety of sources, cloud-based solutions can open the doors to predictive shipping, highly accurate demand forecasts for components & products across the portfolio, determine the best routing paths within the inventory and outside the enterprise for products in transit and eliminate other process-based inefficiencies.
Single data, multiple functions – The end of silos
Siloed functional improvements can land manufacturers into cost black-holes that are indifferent and unaware of variables beyond their function. Cloud-based supply chain solutions obliterate the challenge of siloed initiatives and bring a single view of the enterprise across departments.
This opens the door for cross-functional collaboration within the enterprise and with suppliers & customers. Moving beyond, enterprises should look at AI-based solutions that consolidate enterprise intelligence and democratise instant access to the workforce that orchestrates day-to-day supply chain operations. Such solutions can eliminate productivity lapses and time lags from critical processes and simultaneously deliver an improved stakeholder experience both inside and outside the enterprise.
Hedging your bets in favour of long-term growth
The rules of supply chain excellence are changing, and cloud solutions are the need of the hour. The future of manufacturing is connected, digital, intelligent and automated – none of these paradigms is achievable at scale without a centralised cloud platform. Moreover, 2020 has helped manufacturers see more clearly the relationship between their IT strategy and revenue.
To lead in the future, manufacturing supply chain leaders must formulate a value-driven, staggered approach to their cloud adoption strategy and prioritise investments in innovating and delivering with agility & resilience. Enterprises must consider their cloud strategy as a top priority in their quest for supply chain modernisation.