Is the cloud the answer to supply chain woes?

Tighter margins and the constant need to reduce costs is placing enormous pressure on FMCG companies, who not only now compete in an environment of intense global competition, but who also need to shift fresh goods across an increasingly complex and often disjointed global supply chain.

In the last few years the FMCG industry has seen a radical change in market requirements, moving from operational process support, to supporting more strategic and tactical supply chain processes through the use of effective decision tools for the executive level. This has seen a lot of companies implement sophisticated software to support these activities, but needless to say it’s also thrown up a host of new challenges.

Whether it’s inventory management, transportation management, forecasting or financial management applications, technology strengthens all areas of a company’s supply chain. Co-existing alongside these technologies however, are a number of barriers and challenges: there’s the initial outlay of capital, ongoing maintenance and licence costs for each application, as well as the integration of these applications with internal and external partner systems.

FMCG organisations typically generate a lot of disparate information from these systems. Integrating functionality and data sources that have traditionally been stored in separate applications and databases is essential for organisations that want clearer insight into data from across their supply chain.

Cloud computing: Is it the answer to supply chain woes?

It’s already considered the ‘next big thing’ in the IT world, but Cloud computing offers real opportunities for FMCG companies to lower the cost of their IT spend. Put simply, The Cloud refers to the delivery of applications over the internet. Microsoft’s latest version of Microsoft Office365 is a prime example, it doesn’t involve installing any software on the PC so if staff need to access a spreadsheet, for instance, then they simply click on a desktop icon and a web-based version of Microsoft Excel launches for them to use.

The Cloud allows organisations of all sizes to benefit from having access to a limitless amount of processing power and storage capacity that would otherwise be too costly for them to manage in-house. For this market it’s particularly useful, because organisations often keep data-heavy applications in-house, such as inventory management, logistics, customer relationship management, planning and forecasting.

Collaboration improves relationships

Any ambitious FMCG company relies on relationships, whether it’s with retailers, suppliers or manufacturers. They need the ability to share logistical and supply chain information with partners in order to keep their supply chain as efficient as possible, but often this introduces a host of integration issues when it comes to integrating individual applications. However, with Cloud-based applications they can be rapidly integrated with very little effort or cost, and as a result, all stakeholders involved in the supply chain have access to the same information, enabling greater collaboration and communication.

Greater visibility across the supply chain

One of the key challenges in having visibility across a complex, global supply chain is the integration of all applications and systems used by the business – as well as with those of partners, suppliers and manufacturers. Since applications can be easily integrated within the Cloud, businesses can immediately benefit from having a finely tuned supply chain – where all elements are tightly integrated for maximum efficiency. This level of integration helps organisations to spot problems quickly, and react nimbly to changing market dynamics and consumer demand.

Scalability

As the business and supply chain grows, so does the complexity and management headache of the applications and systems used, and the amount of information stored by these systems. Normally, organisations would need to find more physical space in their building to store servers and databases but with Cloud computing, organisations gain access to a virtually limitless about of capacity and processing power. This is often charged per user and per gigabyte of storage used.

Cheaper, pay per user

Rather than pay expensive annual licence and maintenance costs for each application used, businesses can simply pay for each individual user who needs to access each application. A user can be set up with access within minutes, with minimal effort, and all through a single internet connection.

Mobilising the supply chain

Gaining immediate access to real-time supply chain information is perhaps one of the greatest attributes and benefits of Cloud computing. As long as there is an internet connection, users can immediately access applications from any location. The consumerisation of devices now also means that tablets and mobiles can also offer access to important Cloud-based applications on the move.

Punching above your weight

For smaller FMCG organisations, the Cloud offers the opportunity to compete against their larger counterparts. Since Cloud-based applications are more cost-effective than traditional applications, smaller businesses gain access to enterprise-class systems, applications and expertise – but at a fraction of the cost.

What can be stored in the Cloud?

Virtually any business application can be stored in the Cloud.

  • Order and inventory management
  • Planning and forecasting tools
  • Customer relationship management
  • Enterprise resource planning
  • Supply chain management
  • Financial management
  • Human resources

No doubt, the past few years have been the most turbulent in recent history. Sluggish sales, tight margins and an insatiable consumer demand for goods to be delivered fresh and on time, means that FMCG businesses have had to re-think their operations. The emergence of Cloud computing has the potential to radically shape a business.

As data scales, companies find that their IT support structure is not agile enough to grow at the same speed, and in a cost-effective manner. Cloud computing gives organisations the chance to significantly reduce operational and IT costs, helping them to re-allocate resources to deal with more pressing or strategic issues.

Enterprise Resource Planning (ERP) hosting explained

With most ERP systems, you have a choice of on-premise deployment, online service or hosted solutions from your IT partner, or a combination. Hosted ERP solutions give IT departments the flexibility to replace on-premise servers with a hosted equivalent, ultimately helping to reduce the costs incurred in managing their solution. Rather than buying client access licenses and servers, customers pay a subscription fee for this service.

There are many reasons why choosing a hosted solution can benefit your business;

Lower your initial investment: With an online solution you don’t need to buy more hardware or the entire software package up front, automatically lowering your starting costs – unlike conventional onsite solutions, a hosted solution doesn’t need a substantial upfront investment so the burden of implementing, maintaining, and keeping the application up to date is shifted from the customer to the solution provider.

You’re up and running quickly: Online hosted solutions generally offer faster deployment options when compared with on premise solutions. Most typical hosted ERP solutions can be up and running in weeks, rather than months which enables organisations to realise the business benefits earlier, which, in turn, results in a more rapid payback, a greater return on investment, and a reduced total cost of ownership over the course of the investment.

Manage your cash flow with low monthly fees: Just like leasing a car, you can implement a robust financial accounting solution that will support your business as it grows with a low monthly fee. With this option, your provider continuously and discreetly adds the latest features and upgrades, which means that users can be assured that they’re actually using (rather than waiting for) the latest technology, without drawn-out upgrades, customisation and consulting costs.

Reduce your dependence on internal IT resources: If your organisation has limited technology resources available to implement, manage and maintain an ERP solution, the online software as a service (SaaS) offering might be a better option. Hosted systems typically require significantly fewer technical resources to manage than onsite solutions because the hosting provider manages the software, hardware and network administration. This reduces the strain on the IT department, allowing it to redeploy IT resources in other areas.

Making changes on demand: You can add or remove users as your business needs change and be safe in the knowledge that your technology environment is up and running – and working at its best. Hosted solutions are easily scalable and flexible to meet changing business requirements, and adding or removing users can be done on demand (for a simple monthly subscription). This flexibility is particularly beneficial for growing, seasonal, or cyclical businesses that need to quickly change their employee base to meet their unique business requirements.

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Matt Dredge is a Director at TouchstoneNAV. Having left school, Matt qualified as a chef - which of course is an ideal starting point for anyone who wanted a career in IT! Shocked by the amount of hard work and ridiculously unsociable hours he settled for a more grown up career in accountancy. His experience with business solutions guided him into the IT world where he has worked for the last 18 years with products such as Tetra, Oracle and Microsoft Dynamics NAV. The latter being his true love in the business solutions world, Matt specialises in deploying Microsoft Dynamics NAV in the supply chain, distribution, retail, fashion and hospitality markets.