At a time when trade is shrinking faster than production, and U.S. industrial output has dropped 11% in the past year, manufacturers and their trading partners are anxiously seeking all available avenues to cut costs and improve efficiency. While addressing the business problem is foremost, rather than the delivery method, two areas -- Cloud Computing and its subset, software-as-a-service (SaaS) -- can improve business performance by rapidly transforming the supply chain for solid business value. "The Cloud" is serious business: $16.2 billion was spent worldwide on cloud computing in 2008, according to IDC.
The advantages of total cost of ownership (TCO), scalability, and the pay-as-you-go cost structure of SaaS have driven its adoption in both manufacturing companies and those that outsource manufacturing to manage their supply and demand chains.
"Annalee saves around 900 man-hours of labor a year," reports Dave Pelletier, CEO of Meredith, N.H.-based Annalee Dolls, Inc., user of SaaS-based RedTail EDI management. "More importantly, the SaaS option allows us to ensure we meet the requirements of our very large customers without the charge-backs incurred by errors and non-compliance."
As companies evaluate whether to go with SaaS solutions as part of a move towards overall cloud computing, they're considering further benefits: increased visibility, agility and better collaboration.
Visibility & Agility Across the Supply/Demand Chain
Major financial value and business agility derives from visibility -- visibility into every segment of the supply and demand chaini.
SaaS solutions provide the hardware and software infrastructure, easy upgrades, remote, scalable storage, "Support-as-a-Service" and low, predictable costs through subscriptions. With the addition of cloud computing, the supply chain further benefits from the glue that holds the parts together.
"The first wave of supply chain automation focused on modeling complex processes within the four walls of the enterprise," says Tim Minahan, chief marketing officer for Ariba, a Sunnyvale, Calif.-based SaaS procurement company. "The next wave will focus on enabling simplified business processes with embedded intelligence across an extended network of trading partners. SaaS was the enabling delivery model for this inter-enterprise collaboration. Yet, the cloud is the next wave, providing a combination of processes, software and intelligence all delivered as an accessible, web-based service -- or a mash-up." Ariba saw a 73% jump in its subscription revenue, from $18.8 million in the third quarter of 2007 to $32.6 million in the same period in 2008.
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