The Inevitability of outsourced Supply Chain Management - Supply Chain as a Service (SCaaS)

By Dr. Michael Keppler, Strategy Advisor, Steelwedge

Dr. Michael Keppler, Strategy Advisor, Steelwedge

“Change is the law of life. And those who look only to the past or present are certain to miss the future.”—John F. Kennedy

I take this quote as a warning against fear of change, something those in the supply chain management industry should consider. There’s a change coming on, and it is likely to transform supply chain management before the end of the decade.

"The typical “silo optimization” of internal and outsourced supply chain management functions has a negative impact on end-to-end supply chain performance."

Challenges of traditional SCM

While the development of the cloud has made SCaaS a feasible option for organizations moving forward from a technical point of view, what will really drive it is the failure of typical organization centric supply chain management (SCM) organizations, processes, and software solutions to meet the needs of today’s complex and increasingly dispersed supply and demand networks:

 • Globalization’s cost benefits are overshadowed by complexity costs: common tools and processes are not sufficient to manage extended supply chain complexity effectively.

 • The typical “silo optimization” of internal and outsourced supply chain management functions has a negative impact on end-to-end supply chain performance.

 • Even if so called “advanced tools” are in place, they are often used poorly because organizations lack the necessary experience and expertise to run, adjust, and orchestrate complex tools to meet their needs. As such, SCM performance often degrades over time–even after successful implementations.

 • Supply chain organizations often continue to use manual and spreadsheet-based tools that drive up costs and reconciliation time while driving down efficiency and quality of service.

 • The development of software and solutions has not kept pace with the requirements of today’s extended enterprise networks; moreover, companies are frustrated with the high implementation and operating costs of complex SCM solutions.

 • While today’s extended supply chain networks cannot be managed efficiently and effectively SCM can no longer be considered a core business function of the organization.

As outsourcing and global competition continues to drive the evolution of supply chain management, the nature of that evolution (i.e., towards increasingly complexity and nuance of networks, greater need for network agility to meet constant change and volatility) will move companies to adopt SCaaS. While it may seem counter-intuitive, as supply networks become more complex, dispersed, and fluid, SCM becomes less of a core business competency and more of a technical and organizational evolution supporting the needs across supply networks. This may seem hard to grasp, but so too was the idea that global brands (think computers and smartphones) would take their logistics and more recently their manufacturing out of house. We see where that has gone.

The fact is that supply chain management is a pan-enterprise discipline that requires both technology and process know-how that most organizations do not have or cannot afford to incorporate. Companies looking for more comprehensive and efficient supply chain solutions will stop investing in traditional on-premise SCM solutions and turn to SCaaS as a more sustainable and effective way to manage their supply and demand networks.

What the Future Will Look Like

Publications such as the Harvard Business Review and analysts such as McKinsey have indicated we can expect to see SCaaS emerge as a significant business model by the end of the decade and I agree with that. Here’s what to expect:

 • Non-core SCM competencies will be outsourced to an SCaaS partner who acts like an extended wing of an organizations’ SCM department. The focus will be on end-to-end supply chain performance and commitment to end-customer value. Similar to Logistics Service Providers’ goals today.

 • Organizational focus will be on managing expectations and setting clear requirements for their SCaaS partners, leveraging the partners’ scalability, flexibility, and expertise to set up and operate supply chains.

 • SCaaS providers will leverage an open cloud-based plug-and-play platform that allows them to address their customers’ supply chain needs (e.g., visibility, planning, and execution) across the extended enterprise network with surgical precision. Typical offerings will include end-to-end planning, visibility, and KPIs; integrated production, transportation, and procurement planning; planning model adjustments; inventory sizing and positioning; and general advice on process and solution improvements. One can imagine that this will be an exciting workplace and, hence further improve the quality of a SCaaS provider during the battle for top talent.

This future is closer than most imagine. Steelwedge continuously expands its platform based on a comprehensive data layer where different tools are orchestrated according to customer needs (e.g., demand planning, sales planning, supply planning, and inventory optimization). Customers are supported by Practitioner Services not only during the initial project work but also for ongoing operational support and following continuous improvement efforts.

While that is a starting point, it’s not a stretch to move to a place where a universal data layer provides organizations the ability to pick and choose SCM tools the way people pick and choose apps from Apple and Google today.

It’s not a question of if, but rather when.

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