Cloud-based applications and platforms are revolutionizing supply chains today, scaling operations from the most complex global supplier networks to those being developed by small businesses. Based on conversations with senior management teams including Chief Supply Chain Officers (CSCOs) in the last few weeks, several key insights emerge.
The focus on achieving higher supplier quality, forecasting accuracy and inventory optimization while driving down manufacturing cycle times are priorities today. As a group, the senior management teams leading supply chains discussed the urgency of reaching these goals in the least possible time. Given how quickly cloud-based applications can be deployed and configured for a manufacturer’s specific needs, more manufacturing teams are considering the cloud as a quick path to accomplishing their goals.
Supply Chain and Cloud Trends
- Gartner expects that by 2020, over 90% of spending on supply chain execution systems will be for cloud supply chain solutions.
- By the end of 2020, one-third of all manufacturing supply chains will be using analytics-driven cognitive capabilities, increasing cost efficiency by 10% and service performance by 5%, according to IDC’s Supply Chain Predictions for 2018.
- 65% of surveyed supply chain professionals believe that supply chain management (SCM) technology, including cloud computing, is a source of competitive advantage, according to a recent Gartner study.
For Supply Chains To Excel, They Need Cloud Applications’ Speed & Scale
For all manufacturers, 2017 turned out to be a growth year they hardly anticipated. Many had begun the year expecting mediocre or slow demand, only to be surprised by the rapid growth in orders and buying activity by existing and new customers. The challenge is managing their supply chains to keep up. Ask a CSCO or supply chain executive about cloud computing, and they only want to know if it can deliver more speed, scale and accuracy. None of them care about the technology; all they care about is getting results. Cloud apps and platforms are the growth catalysts that will keep improving supply chain performance while catalyzing and fueling global manufacturing growth.
The ten ways cloud computing is revolutionizing Supply Chain Management (SCM) include the following:
1. Supplier Quality Management delivers real-time updates on the latest inbound shipment inspection and quality levels, making sure Bill of Materials (BOM) only define the highest quality components and raw materials. Getting a 360-degree view of every aspect of quality, from inbound inspection to finished product, reduces costs and increases customer satisfaction. Cloud-based SCM applications can track, analyze and report quality levels by production center, product and customer level. Another benefit of having a cloud-based SCM system is the ability to track and trace any assembly, component or subassembly throughout the supply chain in real time. With cloud-based SCM apps and platforms, quality becomes a more pervasive part of the system of record in any business.
2. Improving Manufacturing Cycle Times based on greater insights from cloud-based business analytics and Manufacturing Intelligence systems to scale from the shop floor to the top floor. By definition, “manufacturing cycle time” quantifies the amount of elapsed time from when an order is taken until the product is produced and entered into finished goods inventory. Improving cycle times starts with knowing why and where delays happen in the manufacturing process. In 2018, cloud-based Manufacturing Intelligence applications will be able to provide real-time updates on how production performance is impacting financial results.
3. Knowing which machines and tools are best for a given production run, and which ones are in the best health using the Overall Equipment Effectiveness (OEE) metric pays. OEE is an invaluable measure of a given production machine or tool’s health. It can also be used to measure a product line, production team or an entire production center’s performance. It’s most often used at the machine level to track each production asset’s utilization rate, performance levels and quality, and is calculated using the formula of Availability x Performance x Quality. It’s also pervasively used for predictive maintenance of machinery, which the following graphic is based on:
4. Relying on scalable cloud-based applications to automate compliance and reporting so valuable time isn’t lost by manually preparing industry and government filings. For medical device manufacturers, cloud-based compliance applications remove the burden of spending their valuable associates’ time cataloging records and reporting them. The U.S. Food & Drug Administration (FDA) requires that every manufacturer maintain device history records to the batch, lot and unit level. A cloud-based application capable of producing a Federal Device History Records (DHR) is a major time saving and competitive advantage. Medical device manufacturers also need to stay in compliance with Current Good Manufacturing Practice (CGMP), CFR and FDA requirements, as well as ISO 13485 and 9001 standards.
5. Attaining real-time track and traceability performance becomes more achievable with cloud-based applications that scale across supplier networks. The more production locations a manufacturer has, the more important supply chain visibility is to maintaining quality levels and gaining greater track and traceability data. Cloud-based track and traceability saves many manufacturers from the unpredictable expenses of a product recall by catching product quality problems early.
6. Integrating with diverse applications, databases and systems using APIs (Application Programming Interfaces) scales manufacturing strategies faster than ever before. APIs are a factor that’s driving the proliferation of cloud apps and platforms across manufacturers’ many production and plant locations. Serving as the glue between systems, APIs create real-time integration links between systems that enable more efficient data sharing, collaboration and transaction accuracy. Integration costs continued to plummet as APIs became more pervasive and broader in scope. Forbes said earlier in the year that 2017 is quickly becoming the year of the API economy.
7. Cloud-based Warehouse Management Systems (WMS) are enabling higher supply chain performance by optimizing order management and production planning across all warehouse locations. Knowing inventory levels throughout supply chains makes inventory planning and management more efficient for each production center. Cloud-based WMS and ERP systems over time generate data sets that tend to show patterns, making it possible to anticipate shifts in demand. This insight contributes to greater forecast accuracy and the potential to optimize manufacturing schedules. And with cloud-based WMS, ERP and analytics systems designed to optimize inventory, order management and fulfillment, manufacturers see profit and revenue growth gains.
8. Reducing Order Cycle Times and rework by automating pricing, quoting and customer approvals with a single integrated system. Product quality problems often begin when an incorrect or incomplete order gets created. Errors in pricing, quoting, product configuration or delivery instructions all introduce errors, slow down orders and drive down product quality. Automating pricing, quoting and customer approval workflows with a cloud-based application helps reduce order cycle times and improve quality. Order accuracy goes up along with customer satisfaction, while delays in paying invoices drops, which reduces Days Sales Outstanding (DSO).
9. Integrating product development, engineering, supply chain management and production planning on the same platform increases new product introduction success. Instead of rushing new products into an initial manufacturing run, manufacturers who excel at product quality are willing to sacrifice a few weeks to get the product right. Readiness reviews and the highest priority problems or bugs are fixed, and the schedule gets shifted to support higher quality. Cloud-based applications are integrating product development, engineering, supply chain management and production planning teams on a global scale to reach higher product quality levels.
10. Tracking Perfect Order Performance for the first time across multiple production centers globally using cloud-based ERP systems as the system of record. Perfect order performance measures how effective a manufacturer is at delivering complete, accurate, damage-free orders to customers on time. The more complex the product lines and configuration options, including build-to-order, configure-to-order and engineer-to-order workflows, the more challenging it is to attain a high perfect order level. Greater analytics and insights gained from real-time cloud-based ERP integration help complex manufacturers attain higher perfect order levels over time.