The development of cloud computing technology has created an interconnected, digital world that carries huge potential for logistics. Cloud computing, as explained by MIT, is on-demand access to computing services over the internet. Simply put, it’s using a computer without it having to be physically on your desk. Instead, you’re using a setup powered by a cluster of hardware somewhere in the world, delivered to you by the internet. The cloud draws on servers, storage, databases, networking, software, analytics and intelligence.
Until 2020, progress toward the cloud was gradual, Harvard Business Review notes. Since the COVID-19 pandemic and the resulting boom in ecommerce, the use of cloud computing in the logistics industry has accelerated dramatically. According to Report Ocean, the cloud supply chain management market was worth USD 4.4 billion in 2020. It is now registering an impressive compound annual growth of 20%, which means the market will reach an expected USD 27 billion by 2030.
Cloud computing platforms have many benefits. Among those listed by the Institute of Electrical and Electronics Engineers (IEEE) are easy access to information, scalability and reliability, reconfigurability, and high performance – all without complex infrastructure management. When applied to logistics, it creates many opportunities including for improved agility, reduced risk and less waste.
New scalability and increased agility with cloud supply chain
Cloud scalability is the ability to increase or decrease computing, storage and, network services to meet changing demand. This can be done quickly and relatively cheaply, and it is one of the primary drivers of the increasing popularity of cloud computing in logistics.
This level of scalability is key to maximising agility in logistics. Disruptions and unpredictability have become the norm for supply chains. In this climate, agility is key to surviving and thriving. Deloitte identifies three key facilitators of agility as:
- Better and more timely data and improved end to end visibility
- The ability to execute quickly
- Integrated and collaborative relationships with supply chain partners
The benefits of cloud computing in logistics include offering a holistic view of the supply chain through detailed information and analytics. Supply chain management cloud software can improve decision-making and help companies anticipate and predict market changes and disruptions across their supply chain. They can then scale quickly in response, regardless of the size of the business in question. Cloud computing also allows for closer collaboration by facilitating a two-way information exchange with supply chain partners in near real-time. This can include sharing inventory, production schedules and capacity information to streamline the end to end supply chain response. These aspects of cloud computing support fast and effective decision-making. They allow businesses to respond, adapt and act faster, ultimately boosting agility.
Cloud computing can generate significant value for logistics companies following mergers and acquisitions by improving ‘time to value’ (TTV). TTV is the time it takes for a customer to get a positive return on a purchase – whether that’s a business, service or product. The shorter the TTV, the better. Cloud computing allows companies to share access to data and applications quickly and affordably to any device, anywhere. It accelerates the onboarding process and shrinks the TTV.
Reducing risk and building resilience with cloud supply chain
A 2021 survey by Deloitte and the Materials Handling Institute (MHI) industrial body found that reducing risk is a priority for many supply chain professionals. An additional 54% of those surveyed said they were substantially increasing their investment in cloud computing and storage to make the supply chain more resilient. In the same way that the cloud computing in logistics boosts agility (improving speed, scalability and visibility), it can help reduce risks and increase resilience in the supply chain. A recent Accenture survey found 52% of supply chain executives said the cloud had help them increase resilience. The executives also said the cloud had increased the accuracy of their demand forecasts by 26%.
It’s important to note that introducing cloud computing in logistics also creates risks that, in turn, must be managed. The Fintech Times reports that 88% of cloud breaches are the result of human error. This highlights the importance of airtight governance and regular training for cloud users. Data protection and privacy are key considerations and securing the cloud-based infrastructure is crucial. As Security Magazine points out, it’s also important to have backup capabilities in place and to conduct regular schedule updates to address vulnerabilities. A ‘zero trust architecture’ can also be applied – it draws on users’ role, location, device to assess and block inappropriate access.
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Helping to cut waste in the supply chain
The World Bank calculates that over 2 billion tonnes of waste are generated globally every year, and this is expected to grow to 3.4 billion tonnes by 2050. The sustainability of supply chains and the role they play in creating waste is increasingly under scrutiny. In fact, it was a key talking point at the 2021 Conference of the Parties (COP26) meeting in Glasgow. In all, 48% of supply chain executives surveyed by Accenture in 2021 said the cloud helped them to improve sustainability, including by reducing waste. Cloud technologies can help companies expose inefficiencies in the supply chain and identify where waste is occurring. They can then make changes to reduce the waste. To further shrink their carbon footprint, the cloud can help business find ways to reconfigure their supply chain to drive efficiencies, finetune logistics and transport routes, and optimise their use of resources.
As Earth.org explains, cloud computing is more energy efficient than having on-premises servers. However, it does have an environmental impact which must be considered. Currently, data centres account for up to 1.5% of global energy use and 1% of energy-related greenhouse gas emissions, according to the International Energy Agency (IEA). Demand continues to grow for data storage, so choosing cloud providers that are committed to carbon reduction and responsible innovation is important. Many data centre operators are committing to exclusively using renewable energy, setting carbon-free energy targets and reducing water usage.
The future of cloud computing in logistics
The cloud is changing supply chain management and becoming increasingly important to logistics.
Increased scalability and agility, improved decision-making and risk management capability, and opportunities to reduce waste are just the beginning of what cloud computing can offer logistics. As the technology continues to evolve, it will become increasingly synonymous with visibility, flexibility, efficiency and agility.
While moving into applying cloud computing in the logistics industry is not without its risks, the greater risk would be to ignore its potential and growing influence.
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