3PL in the Cloud: The Next Step in Improved Logistics?

3PL in the Cloud: The Next Step in Improved Logistics?

Cloud technology, where services and data solutions are provided via an online solution, is attracting the attention of many executives in the logistics industry.  Among the many advantages that cloud computing offers, the two most attractive are value and flexibility. Because of these advantages, cloud computing is becoming a larger piece of the supply-chain solution. According to the technology research firm Gartner, supply chain software spending will total $2.3 billion in 2013, and 18 percent of that spending will be on cloud-type solutions.  As the movement towards cloud based solutions continues to expand, it is important for third party logistics companies to lend serious consideration to cloud based technology in their current and future strategic planning. For this very reason, Barrett Distribution put together a quick list of advantages and disadvantages to cloud computing for the logistics industry. 

With the emergence of omni-channel distribution, firms are looking for ways to cut costs and gain efficiencies.  Cloud computing has the potential to offer both sought-after abilities.  Cloud hosted systems afford organizations the ability to enhance and upgrade their current systems without the steep up-front cost, IT resource drain and infrastructure design.  Let’s take a look at some of the advantages to cloud computing for the logistics industry.

1. Cost – Cloud based systems in the logistics industry offer an ideal cost structure for most organizations.  Because most don’t want to make a large up-front investment into a software, logistics companies are turning to cloud systems.  These cloud base solutions offer companies the ability to pay for only what they need or use.  Additionally, because of the speedy setup associated with cloud services, logistics companies are allowed to see a quicker return on investment.

2. Simplification – The logistics industry is a part of a very complex ecosystem in the supply chain.  Transactions take place across multiple parties in various ways.  Solutions that bring these transactions together are a must, but this process is not always so simple.  When a supplier begins to use cloud systems, it seamlessly bonds the carriers and 3PLs together in a streamlined fashion. 

3. Scalability – The cloud systems are elastic and scalable, so companies can access more power when they need it.  This allows logistics companies to remain competitive and provides new solutions for their customer base.

4. Security – Many logistics companies are using security as their number-one reason not to migrate over to the cloud.  Ironically, security is a legitimate reason to move over to the cloud.  With cloud solutions, the risk and liability are managed by the service provider, not the logistics company.  These cloud providers have security policies far superior to any internal IT department.  Additionally, all the hardware and applications are hosted in a state-of-the-art data center that is designed to protect the privacy and integrity of your data.

5. Equalizer – The cloud may be the biggest equalizer in the logistics industry.  It provides all companies access to the same powerful business resources and expertise. 

Logistics companies traditionally have housed their technology and data in-house.  For this very reason, a move to the cloud can be quite daunting to most logistics executives.  “Putting information out into the nebulous world where everyone can get a hold of it is a common concern for those firms moving into the cloud for the first time,” says William Kammerer, a partner with the consulting firm Accenture.  Many in the logistics sector mirror this exact concern, and have been hesitant to take the leap into a cloud based solution.  Here are some of the main reasons why some in the logistics industry are not making the jump to the cloud:

1. Performance Risk – When the cloud applications are adopted by logistics organizations, the companies are dependent on the speed and reliability of the third party cloud system.   Additionally, with cloud applications, companies face potential outage risks and are also limited on data transfer. 

2. Customization and Integration – A majority of cloud based systems are limited on integration options. So, the chances that your new cloud system will integrate with the existing IT infrastructure may be quite slim.

3. Strategic Risks – When outsourcing critical data systems, organizations have less control and are more dependent upon third party service providers.

4. Security – As stated above, security is heavily debated.  Some companies state security to be an advantage of cloud computing (see #4-Advantages), while other logistics companies claim it is a major disadvantage. 

Determining if a cloud computing solution is right for your corporation depends on your specific functional needs.  While there are completely rational arguments to both sides of the cloud solution argument, the fact is more companies are turning to the cloud for their current and future logistics solutions. There is no reason to believe that this trend will slow down any time soon. And, the last time we checked, the demands and pressures placed on the logistics industry are not going away.  So, cloud solutions and the logistics industry could very well be a match made in heaven. Only time will tell.