Avoiding Supply Chain Risk by Moving to the Cloud

There is much debate within organizations whether to adopt the cloud or to just maintain their current on-premise systems. Although many companies have already made the leap, a huge chunk of the market is holding back, citing risks around security and privacy. And so the debate continues. But in fact, manufacturing businesses can reduce risk by moving to the cloud, according to a recent white paper by Frost & Sullivan.

Companies in manufacturing, distribution and logistics depend on a smooth-running supply chain. Any disruptions leave it vulnerable as they can substantially impact production and create negative ripple effects throughout the entire chain. Unfortunately, managing the risk of disruption has grown more difficult with increasing supply chain complexity.

Two significant developments are driving supply chain complexity. The first is the increasingly distributed nature of the global supply chain, taking advantage of arbitrage and the free movement of goods and capital to move many manufacturing tasks to low-cost countries such as China, Thailand, the Philippines and Vietnam in Asia Pacific. The second is the adoption of lean manufacturing techniques, which makes production more flexible and responsive with demand.

These two movements, while creating major efficiencies and cost savings, have prompted companies into heavy reliance on IT systems just to manage this complexity, typically using interlinked enterprise resource planning (ERP) solutions to track goods as they move through the supply chain and link operational information in one shared database.

But these systems themselves are vulnerable to disruptions. In the last couple of years, significant business disruptions have been caused by natural disasters such as the Christchurch earthquake in New Zealand, the tsunami in Japan in 2011, and major floods in Thailand and Australia in 2010 and 2011, respectively. Such disruptions affected the supply chain in more ways than one—not only were factories and facilities affected, but the IT systems in those facilities stopped running when disaster struck.

Cloud computing offers a way for companies to reduce risks from external events as they can give their employees continued access to important applications and data over the Internet, from almost any location, in case of a disaster. Services can be provisioned and processes moved in a quick, flexible and scalable manner, to any location in the world.

In Frost & Sullivan’s study, based on a survey of nearly 200 IT decision-makers in manufacturing, distribution and logistics across Asia Pacific, 26% of respondents mentioned experiencing significant disruptions to their IT systems in the past, with 65% stating that the damage might have been less if they have accessed the cloud for their IT applications. The study also found that 47% are already using cloud-based software, as they see the cloud as an effective and generally low-cost solution to respond to supply chain risks such as disasters and sudden changes in market conditions.

Get your copy of the Frost & Sullivan white paper and find out how cloud computing can reduce risk for your organization, especially if your organization is in the manufacturing and logistics sector. 

- Mark Troselj, Managing Director for APAC at NetSuite

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