Jane, Chief Supply Chain Officer (CSCO) of ABC limited, receives orders from customers. These orders are then translated into component requirements by breaking down the bills of materials via exiting ERP system. Purchase orders are created and shared with the suppliers via ERP system. Though the process was semi-automated, Jane found that multiple outbound system integration is required for carrier management, goods tracking etc. There was also requirement of a large in-house team to maintain and monitor systems in place. Jane also realized that her competitors, were leveraging big data and technologies like blockchain to improve their businesses. Even though, capacity utilization of ABC limited was just 60%, due to resource and technology constraints Jane couldn’t work in the direction of 100% utilization.
Can Jane optimize her business?
As the world changes rapidly and embraces new processes and technologies, businesses must ensure proper supply chain management. Agile supply chain management enables businesses to be highly responsive to a rapidly changing environment. Many businesses like Jane, use hybrid supply chain, some information is digital, some information, is physical, and some information is kept away from the overall scope of the company in local. Even though double-digit growth is expected in the supply chain industry by 2030, only 15% of supply chains are ready to accommodate the change.
What is stopping CSCOs like Jane from adapting to the changes? One of the major reasons is that there are multiple stakeholders in a supply chain, more stakeholders more is expertise required. Hence, supply-chain-as-a-service model can solve this problem and make operations much smoother.
Supply Chain as a Service (SCaaS) is a relatively new method for managing a supply chain. With this strategy, portions of the process are outsourced to and supported by a third-party.
Supply Chain as a Service (SCaaS) can be best understood as the division of the supply chain into chunks that can be outsourced to, or accessed by, third parties.
SCaaS is similar to software as a service (SaaS) in many ways. SCaaS allows companies to evaluate their current supply chain management and decide which areas could be improved by outsourcing it to expertise companies. Many service partners can offer end-to-end infrastructure and technology geared to provide cost savings and increase operational growth for businesses.
Switching to a SCaaS system, bridges the gap between logistics and technology and matches the right physical and digital solutions that fits individual business.
There are three primary types or variants of SCaaS:
- Assets and Contract Operations: By exploiting the capacity and capability of operating assets such as warehouses, trucks or manufacturing sites, companies can create an opportunity to produce, deliver or service products for another company. This is an opportunity to commercialize operation capabilities and capacity by contracting with other brand owners.
- Business Process as a Service (BPaaS): This involves using people and technology to manage one or more supply chain functions for another organization. Companies with leading supply chain business processes expertise can sell their capabilities to a business that is not a customer of their physical products.For example, a retailer could use their transportation management team and software to manage the transportation process and function for another company, such as a consumer goods manufacturer.
- Digital Business: This involves transforming the supply chain to support a new business model — especially those with an “as-a-service” sales and revenue model. To support these business models, the supply chain organization often needs to transform from physically moving material, parts, and products to orchestrating data, people, and digital flows across the value chain. For example, a solution provider offering “vaccine as a service” ensures physicians never run out of vaccines. The solution involves Internet of Things (IoT), cloud computing, inventory management, analytics, order management and payment processing. Solution provider uses the IoT-connected refrigerator, which records the inventory reduction and communicates the information to the provider.
Supply chain as-a-Service in Action
Virtually every type of software application is offered in a SaaS model, including software to support ERP, TMS, CRM, Inventory Management, and Invoicing applications, all of which are related to Supply Chain. The use of cloud-based software is an integral part of SCaaS operations. This technology fits seamlessly into a SCaaS model and allows businesses better visibility.
Beyond just software every other aspect of Supply Chain like manufacturing, distribution, procurement, transportation, and more is available as an outsourced, on-demand service. Similar to having third-party logistics, SCaaS allows the use of third-party tech platforms as well. This is usually accessible via a centralized dashboard.
For smaller companies and startups – and even larger companies in need of temporary services – SCaaS gives instant access to industry-leading experts and infrastructure while allowing these companies to avoid the costs and risks of developing a vertical supply chain.
SCaaS also enables companies with extra capacity to maximize profits on their investments and contract operations by offering a portion of that capacity on the open market.
For example, ABC limited can do business transformation as follows:
- ABC limited can partner with various vendors for electronic sensors and Supply Chain visibility software with advanced tracking capabilities which will allow for the real time tracking of the movement of all goods throughout every aspect of the manufacturing, transportation and logistics processes that permeate any Supply Chain. This will enhance the process visibility of Jane.
- SCaaS partner, working on Non-core SCM competencies of ABC Ltd, will act like an extended wing of ABC’s SCM department.
- These SCaaS providers, 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.
- ABC Ltd, on the other hand, can focus on setting clear requirements for their SCaaS partners, leveraging the partners’ scalability, flexibility, and expertise to set up and operate supply chains.
- Thus, SCaaS has enabled ABC Ltd to have better end-to-end planning, visibility and KPIs at reduced cost, reduced team size and faster response time, ie, supply chain on Tap.
SCaaS in the Real World
In real time, SCaaS, is being explored and utilized in several industries like retail, health care and life sciences, high tech industries and OEMs dealers etc
Amazon’s Fulfillment by Amazon is an example of SCaaS in retail. Brand owners sell directly to customers, but Amazon’s fulfillment centers pick, pack, ship and provide customer service. Another example of SCaaS is Woolworths. It elevated and extended its supply chain capabilities to other brands through a service offering called Primary Connect.
Players from OEMs to contract manufacturers and distributors provide one or more forms of SCaaS. Cisco and Hewlett Packard Enterprise are two of the OEMs that have shifted some of their physical products and corresponding supply chains to “as-a-Service.” Contract manufacturers such as Jabil, Celestica and Flex offer manufacturing as a service within the broader SCaaS umbrella. Distributors, including Avnet and Arrow, have a portfolio of SCaaS that extends into non-physical operational business processes.
Several of the healthcare providers such as Mayo Clinic have SCaaS offerings in the sourcing and purchasing area. Johnson & Johnson’s works with Rush University Medical Center to improve inventory management of sutures. The SCaaS, monitors inventory in dedicated suture storage locations at point of use in the perioperative areas.
Though there are number of challenges in adaption of SCaaS, including the various apprehensions from companies itself, SCaaS has proved that businesses no longer need to devote as much time in supply chain management tasks and can instead focus on business growth, with significant revenue addition in top line from Chief Supply Chain Officer (CSCOs) of the company.
In the digital age companies are going to become more reliant on other expert organizations to perform some or all their Supply Chain tasks. In order to leverage all available technologies in the future, companies may not have the expertise, resource, and funding to try to do this on their own. Hence, when SCaaS, becomes a part of SCM strategies, either at the beginning of the supply chain or at the end, benefits business of all sizes, at all stages of operation.