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The Effects of Cloud-based Solutions on Logistics

June 8, 2016
Cloud-based logistics solutions are helping companies gain more supply chain visibility as they collaborate more effectively with trading partners.

Supply chains grow increasingly complex as companies engage globally with customers and suppliers. Expansion may bring more growth, but it also creates challenges to logistics operations like controlling working capital, improving resource and asset utilization, and gaining better end-to-end visibility throughout the supply chain. Cloud-based logistics solutions are game changers, helping companies identify, anticipate and overcome challenges to achieve more cost savings and collaborate more effectively with trading partners.

Cloud-based logistics applications have grown in popularity and adoption by users looking for low startup fees, cost efficiencies, virtually unlimited storage space, and the potential to reduce IT implementation and support fees. In fact, analyst firm Gartner predicts 50% of all new supply chain software deals will be cloud-based in 2016. Cost savings with the cloud are specifically attractive for the logistics industry where profit margins are typically quite thin.

A cloud-based network can be of benefit to companies seeking full visibility into their global shipments, as these shipments go through various checkpoints and can have delays associated with handoffs. If companies gain more detailed insight into these long, protracted supply chains, they can better manage inventory in addition to connecting and educating partners about the shipment throughout its journey.

The cloud empowers the network effect, simultaneously delivering broader connectivity and stronger partnerships. By its very nature, the cloud allows for connections to be made quickly with palpable effects so that supply chain issues can be resolved much faster. Connected companies gain useful, real-time knowledge of what is happening within the supply chain, allowing them to respond to market demands and events like notifying customers if a shipment will be late or searching for a supplier if demand suddenly explodes. Heightened connectivity and insight into the supply chain means better, more effective communication between partners, mitigating supply chain risk and improving customer service levels.

Using a cloud-based supply chain operating network to close the gap on information sharing allows companies with disparate systems to accelerate the cash-to-cash cycle and realize the benefits of end-to-end visibility in their supply chains without requiring them to change the way they do business.

Attempting to force trading partners to collectively adopt a single process or technology standard can lead to unmet expectations and undesirable consequences since individual companies have their own processes and enterprise requirements. Enabling companies to connect and collaborate without enforcing these standards streamlines processes and partner onboarding without disrupting their standard operating procedures, and reduces the friction and challenges of merging or amending existing systems and practices.

Come As You Are

This "come as you are" approach is the key to unlocking the benefits of the "outside-in" supply chain—enabling business transformations and automating processes across a critical mass of trading partners that leads to various advantages, such as:

  • Automation and collaboration savings on shipments and freight invoices;
  • Lower labor costs from reduced data entry and paper handling;
  • Better proof of delivery (POD) visibility;
  • Reduced time fixing errors in billings and invoices;
  • Lower freight audit editing;
  • Improved carrier negotiations;
  • Reduced detention charges;
  • Fewer premium shipments needed;
  • Better control over accessorials;
  • Improved cash-to-cash cycle from faster POD information;
  • Better inventory management;
  • Real-time visibility to logistics service providers’ activities.

A supply chain operating network also facilitates effective communication through B2B social, where people can collaborate on a much larger scale versus traditional methods of e-mail, fax, or phone. The larger the network, the more value the platform gives to people who are connected.

This is true of companies that have to learn from and conduct business with others, whether it is searching for new suppliers or prospective customers or trying to find a new carrier to ship a load. Using the network and its social capabilities in this way can be especially valuable when confronted with acute market demands or shortages, such as the recent reduction of capacity and current driver shortage, which makes finding capacity using traditional methods to ship loads more difficult.

Using a cloud-based solution to foster communication between shippers and carriers can help eliminate the delay of manual methods of shipment notifications and accelerate cash-to-cash. A supply chain operating network allows companies to create an ecosystem of partners capable of providing data in an automated, real-time manner without the complications of data integration as critical information arrives when systems and individuals need it. By eliminating this delay in the logistics division, shippers receive actionable information faster and can create an order-to-cash, cash-to-cash cycle advantage instead of removing cost from the freight budget.

It is not enough to simply collect and transport data across the network; it is equally important that the data be accurate and useful. How do you ensure "good" data? Some companies rely on spreadsheets, but spreadsheets contain static and potentially outdated information. For reliable KPIs, optimization and management, companies need reliable master data, a single view of the business based on real-time, actionable information gathered from multiple systems across the enterprise. The adverse environment creates "dirty" data, which is expensive, costing companies an estimated 20% of their operating profits. For the process industry, that equates to $200 billion.

Dirty data affects logistics performance significantly across all categories, equating to about $40 per shipment comprised of costs related to:

  • Labor: Fixing data in systems, manually implementing data corrections across carriers and other partners, re-booking shipments, handling disputes.
  • Freight: Premium freight costs, unplanned accessorials.
  • Cash-to-Cash Cycle: Delays at transshipment points due to incorrect shipping documents, invoicing errors.

Next-generation companies are already reducing or even eliminating these costs by leveraging technologies and applications in the cloud. Companies can often experience better business outcomes through increased savings, customer service levels and productivity by capitalizing on all the competitive advantages a cloud-based supply chain operating network can offer. 

Ed Rusch is a vice president at Elemica (, a supply chain operating network for the process industries.

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