Editor's Note: The following is a guest post by Rod Daugherty, vice president of product strategy for Blue Ridge.
It’s no secret that cloud based computing is becoming more prevalent across a wide array of industries. Forrester research projects that revenues from cloud computing will grow by more than $241 billion through 2020. This race to the cloud has been fueled by strategic value and bottom-line cost savings.
As we are all aware, the nature of commerce is changing. Whether you are a retailer selling to consumers or a distributor selling to other businesses, or a combination of both, the fact remains the same. Because of the access to information and speed in which information travels, your customers make decisions faster, are less loyal, and more demanding than ever.
The simple response to what do you do about it? You need to fundamentally change your approach to the supply chain if you want to keep customers happy without racking up costs and driving business into the ground. In other words, be prepared to deliver exactly what your customers want when they want it—and do so profitably.
Cloud, Big-Data, Predictive Analytics, IoT…. the list of buzz words goes on at a seemingly endless length. And if you’re like me, you’re tired of hearing about it.
I bring it up here to say one thing. That is, the data revolution that has occurred and continues to occur has a significant effect on the way you plan your inventory and supply chain.
We promise to use these words sparingly (!) and only in the context of practical inventory planning applications.
The burden of history
In supply chain, cloud technology addresses a historical problem faced by companies since the advent of forecasting and inventory planning. Inaccurate forecasting, imprecise recommendations and slow reaction to shifting trends, disruptions and conditions.
There is a good reason for this — until cloud computing, processing power was fundamentally limited due to the cost prohibitive nature of on-premise servers. Therefore, supply chain technology solution providers were forced to sub-optimize algorithms to fit the limited processing power of their deployment environment. Bottom line: solutions developed before cloud were forced to deploy averages, estimates and assumptions rather than the precision and agility required for the dynamics of today’s market.
What that means for users is that they are presented data and information that still requires a significant amount of discernment or manipulation to determine the appropriate action.
The real benefits of cloud
For years now, the general accepted argument for a cloud solution over an on-premise solution has gone like this:
On-Premise: Lengthy installation, expensive/time-intensive upgrades, hefty up-front costs/capital expenses and burdensome IT maintenance/administration costs
Cloud: Quick installation, Rapid innovation, pay-as-you-go operating expenses, global access for employees/lower total cost of ownership
But in my opinion, the real benefits of the cloud over an on-premise solution are: unprecedented precision, visibility and pace of enhancement. How?
- Greater precision from more powerful algorithms and virtually unlimited processing.
- Greater visibility enabled by the broadening of demand & supply planning projections and at the same time the granularity of detail available in demand & supply plans
- Speed of enhancement from easier, faster platform upgrades in a cloud-native architecture
True cloud-native architecture delivers much-needed economies of scale. With the cloud, companies can work with extremely large sets of data and perform complex operations across that data without massive investments in hardware that spends nearly all its time underutilized. For example, producing precise order projections for every SKU and location, while optimizing across echelons, for 365-day demand plan would be cost prohibitive in an on-premise environment.
What does the new world of cloud supply chain look like for me?
How does all this boil down into helping my inventory planning? Here are a handful of enhanced capabilities that you need to compete today, enabled only by the virtually limitless processing power of a cloud-native solution:
- Analyze every customer transaction to determine what caused demand and predict future sales
- Automatically plan considering every condition in the supply chain:
- Probability, economics, order schedules, supplier constraints, supplier capacity limitations, lead time variability, current and future stock conditions, order constraints and more
- Optimize inventory in a multi-echelon, omnichannel environment
- Provide prescriptive analytics with action-ready recommendations, without making your team guess what to do
- Generate highly accurate forecasts, precise demand & supply plans, and easy execution
- Provide visibility internally and externally to detailed demand and supply plans
- Enable easy aggregation, disaggregation and management of demand and supply at any level
- Simulate the effects of different service, cash, and inventory goals, then apply and re-plan to achieve precisely your organizations goals
- Respond and re-plan rapidly in the face of changing trends, new conditions, and disruptions
A spreadsheet here. Some guess work there. Manual manipulation of forecasts and inventory orders. Gut feel. Intuition. They just won’t cut it anymore and you don’t have to settle for that. Your world is growing in complexity and you need to meet multiple goals that are seemingly at conflict. In the cloud, you can have it all without compromise.
In each of the steps in the series, everything relates back to one important key: understanding your customer better and precisely predicting future needs. This will enable you to compete and win in this hyper-competitive and constantly shifting marketplace.
Rod Daugherty is the vice president of product strategy for Blue Ridge, where he oversees product direction. For the last 21 years, Rod has been a consultant, designer, and product executive for multiple supply chain software companies including E3, JDA, Evant, Manhattan Associates, and Blue Ridge. He can be reached at [email protected]