Choosing the Right Tools for the Job
Q: What does the profusion of cloud-based value chain applications and services tell us about the future of supply chain automation?
O’Leary: We believe EXTOL and other technology vendors will continue to offer both cloud-based and on-premise delivery of supply chain automation products and services, for the foreseeable future. Cloud-based offerings bring new delivery options to technology consumers, but for many businesses, retaining supply chain automation on-premise can make more sense.
One obvious case is when a company’s business model focuses on delivering supply chain automation services (e.g., a 3PL). But in many other cases—such as companies that deal in perishables and other fast-moving goods, participate in numerous value chains, or experience high levels of partner-driven changes—managing supply chain automation on-premise can reduce risk exposure, allow faster response to changes, and contain costs more effectively.
Of course, even when supply chain automation does occur on-premise, supplemental services, such as international logistics, small partner onboarding, and even traditional VAN services (such as mailboxing and gateways) are frequently good fits for cloud-based delivery.
What isn’t always clear in this discussion is that cloud-based infrastructure and services delivery are decoupled models. For example, companies can now self-implement and manage supply chain automation using cloud-based infrastructure. And for companies that don’t want to take an irrevocable step in one direction or the other, one popular “hedge” strategy is to retain automation infrastructure on-premise, but outsource implementation services to a remote provider.
Q: For companies that make the decision to self-implement, what are some best practices for managing the cost of supply chain automation?
O’Leary: The biggest sources of unnecessary cost in supply chain automation are infrastructure redundancy and applying inadequate tools and skills. Redundant infrastructure is mostly the result of one-off, project-level technology choices and inadequate or poorly enforced standards. It not only has a multiplying effect on capital budget requirements, but also increases operations, maintenance, and training overhead.
Using tools and skills that are poorly matched to the problem at hand results in missed deadlines and project failures. But choosing “the right tool for the right job” can actually contribute to infrastructure redundancy, if not properly planned. Look for solutions that provide not just the capability you need for your project, but also offer the option to add capabilities to support future projects and requirements.
One last point—be sure to consider the cost of ongoing maintenance activities before choosing any solution. Over the lifespan of some supply chain applications, maintenance costs can exceed original project costs. So look closely at capabilities aimed at reducing maintenance time and effort.