Investment Strategies for Implementing Cloud Systems in Supply Chains

Investment Strategies for Implementing Cloud Systems in Supply Chains

Li Zhong Zhang (La Trobe University, Australia)
DOI: 10.4018/978-1-4666-6445-6.ch003
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Advances in computing technologies have presented the management of supply chain firms with opportunities to enhance the competitive advantages of their organisations. Some of those opportunities arise from the deployment of modern systems that encompass the three most important components in supply chains management: namely, enterprise resource planning, customer relationship management, and e-commerce. The current technology available in cloud systems appears to satisfy the needs of supply chain firms for managing resource planning, customer relationship, and e-commerce simultaneously. The main purpose of this chapter is to alert supply chain firms to the risks that they could face if their cloud system implementation is not carefully managed or if not appropriately selected and supported. The proposed investment strategies could assist supply chain firms in ensuring that their cloud system activities are positioned to assist and sustain their competitive advantages.
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Everyone is talking about the ‘Cloud’ and every company is supposed to have a strategy for migrating their old-fashioned data centres and IT departments to it. It is seen as the future in technology, helping to cut overheads and effectively making of computing a utility in much the same way that we view the electricity supply. In the words of John Naughton, ‘The network is now the computer’ (Naughton, 2012: p.175), and the promise of the Internet acting as a grid connecting companies and users together is due to become a reality. The Internet is beginning to drive radical change in supply chains (Salcedo & Grackin, 2000). A feeling is present that if you do not get aboard quickly, then you will be left behind by the competition. The danger in this atmosphere is that strategic mistakes will be made and companies could suffer some financially detrimental consequences to their business. The purpose of this paper is specifically aimed at companies operating in the supply chain and so will examine some of the features of supply chain management and provide for investment strategies for companies when looking at the implementation of cloud systems. More importantly, how can the return on this investment be measured?

However, there is little known about the best implementation practices and most importantly the applicability of suitable business models that favour certain deployment over another in different applications and settings. Given that these cloud systems are very costly to implement and maintain, it would be almost imperative that firms find and search for new suitable business models and implementation practices that ensure cost effectiveness of their investment. Initially, lower-level cloud-based services such as accessing raw compute power or storage capacity over the internet (infrastructure-as-a-service) and exploiting web-based development environments (platform-as-a-service) will be of most appeal for use in tactical situations. Employment of the cloud delivery model will also be more readily embraced for standardised application areas such as finance and human resources (software-as-a-service) that do not provide organisations with competitive advantage. But it has taken the best part of 10 years for companies to embrace enterprise resource planning and become confident enough to use it in their core processes and, while it will not take that long for cloud computing because timescales are being compressed, it will be at least two or three years (Barbour, 2011).

Enterprise IT leaders spend a lot of time and energy on their cloud strategies, determining which deployment models to implement, which workloads to migrate, and which vendor's cloud services to subscribe to. They have high expectations for their cloud solutions as they are looking to reduce costs, introduce business agility and speed to market, and create process efficiencies.

The significance of supply chain concept in the new economy is best demonstrated by the growing sentiment that many firms are not competing against each other alone, but instead their supply chains are in effect competing against their competitors’ supply chains. Accordingly, one of the most critical questions to be asked is: whether the selected cloud system meets the strategic objectives of the supply chain firm? Furthermore, whether the implementation of the cloud system in the supply chain firm is successful? To answer these questions, it would be necessary to identify the characteristics of the cloud system and match them with the required or desired features in the supply chain firm. In other words, a method of assessment and evaluation of cloud systems’ deployment would be necessary. Failing to do so could expose supply chains to unnecessary risks that should have been addressed at early stages of the implementation processes.

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