Review of “A Cloud-Based Supply Chain Management System"

Abstract

This is a review of “A cloud-based supply chain management system: effects on supply chain responsiveness” by Giannakis, Spanaki, and Dubey. Their paper illustrates the shortcomings of traditional enterprise software in the face of modern supply chains, supply chains that involve multiple partners working collaboratively to regularly produce goods and services. To address these deficiencies, they design a cloud-based supply chain management system.

This review begins with an overview of the major concepts used in the paper (supply chain responsiveness and cloud computing), then examines the inadequacies that Giannakis, Spanaki, and Dubey find in traditional enterprise software. We next examine their architecture for a cloud-based alternative and verify that their proposed system does satisfy and enhance the three criteria they claim makes for a responsive supply chain. We demonstrate how supply chain management theory applies, and then conclude with the managerial implications of the findings in that paper.

Authors’ Purpose

Modern supply chains are no longer single-company affairs, and instead frequently involve competing suppliers of materiel and services. Giannakis, Spanaki, and Dubey seek to answer the following two questions about this situation. First, are enterprise IT solutions for supply chain management sufficient to supervise these modern supply chains with extension into the enterprise? Second, can cloud-based supply chain management systems resolve any of the shortcomings of enterprise IT systems?

Their answer to the first question is no: IT solutions that are not usable by external participants in the supply chain do not support the desired goal of a responsive supply chain, the main difficulty being that supply chain participants do not have visibility into the supply chain.

The answer to the second question must be justified by at least a description of a cloud-based supply chain management system. The authors do this by presenting a somewhat detailed architecture of such a system. They then show that their proposed architecture addresses all the criteria for a supply chain to be responsive.

Background Concepts

The goal which Giannakis, Spanaki, and Dubey seek to achieve is supply chain responsiveness (SCR), which can be defined as the speed at which a supply chain can deliver demand and can be measured in terms of the time needed to fulfill orders. (Quigg, 2022).

Software systems available to a single company, such as enterprise resource planning (ERP) software, all fail to satisfy at least one of those qualities. ERP and similar solutions do not allow the multiple participants in a modern supply to be interoperable – the systems fail to make relevant information visible to the participants.

Cloud computing moves the creation and maintenance of computing resources to a specialized department or, more commonly, to a third party. Moving to a third party allows for the commercialization of networks, servers, applications, storage, etc., so that they can be leased and released by users on-demand. Cloud service features include on-demand services, resource pooling, rapid elasticity (change in size or capacity on an as-needed basis), broad network access, and measured and rate-limited service. The benefits of all this include dynamic scalability, outsourced management, and lower total cost of ownership.

The business model of cloud computing involves service providers (owners of the cloud infrastructure such as Amazon Web Services, Microsoft Azure, etc.), customers (users), and brokers (e.g., AWS resellers who provide additional support). Thus, a customer may use a service provider directly, or use a broker for specialized consulting, additional technical support, etc.

The services provided by cloud service providers can be grouped into three broad layers: SaaS, PaaS, and IaaS. Software as a service (SaaS) involves licensing software and making it available via subscription. Platform as a service (PaaS) is a complete development and deployment environment that allows users to execute and manage custom applications. Infrastructure as a service (IaaS) is on-demand cloud-based hosting of servers, network resources, and storage. Cloud service providers can certainly run a wide variety of software applications, but the application type that most interests Giannakis, Spanaki, and Dubey is cloud-based supply chain management (C-SCM).

Summary of Article and its Context

After defining the criteria a responsive supply chain must possess, Giannakis, Spanaki, and Dubey evaluate enterprise software in light of the fact that contemporary supply chains involve multiple suppliers of goods and services. They come to the decision that ERP and other enterprise applications are not up to the task, the primary weakness being that the applications do not provide visibility into the supply chain partners.

The alternative they propose is a cloud-based solution. To demonstrate this, they propose an architecture for this solution. There are six separate modules in their system.

First is a pool of traditional SCM applications, deployed as loosely coupled services, each designed according to a service-oriented architecture paradigm. Second is one or more databases for storing relevant information about orders, inventories, etc. Next is a business process management system (BPM) that allows business rules to be enforced and reconfigured as needed. Fourth is one or more business intelligence applications which provide visibility into the supply chain in the form of dashboards and reports. All of these are connected using an enterprise service bus (ESB) for signaling low inventory warnings, new orders, etc. Finally, there is an application developer’s kit that allows software developers to modify the code. As shown in the following diagram from (Giannakis, Spanaki, & Dubey, 2019), modules will exist in the three levels of cloud architecture: as software as a service, platform as a service, and infrastructure as a service:

Giannakis, Spanaki, and Dubey then demonstrate that their architecture permits visibility into the supply chain (via SCM applications and business intelligence applications), rapid detection and response to risks (via the database and BPM rules operating on it), and the ability to adapt to demand uncertainties (via SCM applications, the ESB, and ultimately the application developers’ kit). Thus, the three qualities they claim make a supply chain responsive are satisfied.

Application of Relevant Supply Chain Management Theory

As stated above, Giannakis, Spanaki, and Dubey wish to apply cloud computing to bring about supply chain responsiveness (SCR), something they claim ERP solutions have failed to accomplish. SCR can be measured in terms of the rate at which a supply chain allows orders to be fulfilled (Quigg, 2022), but this can be difficult to measure when a supply chain produces products/outcomes of widely varying complexity, or when a statistically insignificant number of products are produced. A different approach is needed.

In the literature reviewed in (Giannakis, Spanaki, & Dubey, 2019), three qualities of a responsive supply chain are identified: visibility of information, rapid detection and response to supply chain risks, and flexibility to adapt to demand uncertainties by altering operations, capabilities, and strategic objectives.

While a single company may have complete visibility into its supply chain, a modern supply chain involves multiple providers of materiel and services, and visibility is not always available to all the participants. Visibility into a supply chain is fundamental to the other two qualities.

For a supply chain to continue operations, a system must be in place to rapidly detect risks and overcome them. Detecting and overcoming risks involves visibility into the supply chains and stock levels of partner companies, at least.

Finally, responding to demand uncertainties can involve increasing or decreasing orders from supply chain participants, increasing or decreasing the number of competing participants, or changing expectations. Visibility into supply chain participants again is crucial.

Conclusion - Managerial Implications

Supply chain responsiveness is crucial to a company’s success, since rapidly and consistently fulfilling customer orders is the determining factor of success. Giannakis, Spanaki, and Dubey show that traditional software solutions such as ERP do not provide visibility into modern supply chains, which involve multiple providers. The alternative they propose, a cloud-based supply chain management (C-SCM) system, addresses the problems of ERP systems that can degrade a supply chain’s responsiveness.

Creating a C-SCM first involves choosing a cloud service provider, which can be either internal to the company or a separate provider dedicated to the task. There are advantages and disadvantages to either approach.

Hosting a C-SCM internally provides the greatest control of the company’s data, since the data is kept within the company’s own servers. The primary disadvantage to internal hosting is that supply chain partners must be granted access to the company’s network, and partner companies must grant access to their own networks as well. Thus, security is a major concern here, and internal controls must be expanded and tightened.

Internal hosting will likely require that new hardware be purchased, because available servers may not be sufficiently powerful to operate a C-SCM system. Using separate servers increases network security because payroll and other systems not part of the C-SCM system will be hosted on different servers.

Using a cloud service provider has the advantages that no hardware need be purchased, and that the service provider has automated security and backup systems in place. The disadvantage is that, depending on the service provider’s terms of service, the company no longer owns its own data, as demonstrated by recent events at Adobe (Kaput, 2024). Also, migrating from cloud to cloud is not an easy task and is actively discouraged by cloud service providers.

The cost of operating a cloud service must also be considered. With an internally hosted C-SCM, the responsibility of maintaining the hardware, network, and software all falls on the company itself. Utilities for performing periodic backups must be configured, periodic security checks must be performed, and any security vulnerabilities must be addressed. Thus, the cost of internal hosting not only involves the initial hardware cost but also the cost of network engineers and security architects, and their salaries are dictated by Amazon, Microsoft, etc. Salaries for network engineers and basic services provided by security architects are either covered in the cloud service provider’s fees or are paid for on an as-needed basis.

A cost that remains the same when either internally hosting or using a cloud service provider is the software development cost. In both cases, software development and QA teams are necessary to write and validate the C-SCM system’s code.

Moving from an enterprise supply chain management system to a C-SCM is a daunting task, fraught with potential security vulnerabilities and cost overruns. The advantages a C-SCM provides to a modern supply chain in terms of insight and visibility into the supply chain can outweigh those difficulties.

 

References

Christopher, M. (2011). Logistics and Supply Chain Management (4th ed). Prentice Hall. Retrieved 1 September 2024 from https://www.ascdegreecollege.ac.in/wp-content/uploads/2020/12/Logistics_and_Supply_Chain_Management.pdf

Giannakis, M., Spanaki, K., & Dubey, R. (2019). “A cloud-based supply chain management system: effects on supply chain responsiveness.” Journal of Enterprise Information Management, 32(4), 585-607. Retrieved 1 September 2024 from https://www.emerald.com/insight/content/doi/10.1108/JEIM-05-2018-0106/full/html

Kaput, M. (2024). “Adobe’s Controversial AI Policy Faces Fierce Backlash.” Marketing Artificial Intelligence Institute. Retrieved 1 September 2024 from https://www.marketingaiinstitute.com/blog/adobe-terms-of-use

Quigg, B. (2022). Supply Chain Management (1st ed). McGraw-Hill Create. https://bookshelf.vitalsource.com/books/9781307866025