Supply chain management: In the clouds

The supply chain software business is changing, and that’s potentially good news for end users.

I recently worked on our annual look at the top suppliers of supply chain software for the July issue. One constant theme I heard was that software suppliers are investigating new business models. An MES provider, for instance, is looking at a twist on the hosted, by-the-drink model that was touted back during the Internet boom. Instead of hosting a program at a central location that is accessed by many users, the MES provider will install the application in a server at the user’s site. But the MES will own, maintain and update the server and the program; the customer will be charged based on transactions, like the number of users or the number of bar code scans.

The benefit to the end user: Instead of paying a big licensing and implementation fee upfront, plus maintenance and upgrade fees during the year, most of those costs are built into the transaction fee. It sounds a lot to me like the way a 3PL might charge each time it touches a customer’s products. I’ll be writing more about these changes in the August issue in a story that looks at how the materials handling and software systems providers are helping their customers continue to invest in this down economy.

The other big story, of course, is Software-as-a-Service, or cloud computing. The other day, I talked to Sean Rollings, vice president of marketing at Amitive (www.amitive.com), a provider of something the company calls community supply chain management, which is really another way of looking at the collaboration between brand owners, suppliers and contract manufacturers, logistics providers, and customers in the collaborative contract manufacturing supply chain.

Amitive’s approach, as Rollings explains it, was to create a supply chain management platform from the ground up that could be easily tailored to provide an affordable customer specific solution. Another focus was on reducing the implementation time. “Since last fall, we’ve done three implementations in two months or less,” Rollings told me. “All three are looking at ROI’s of less than six months.” Supply chain management for the rest of us is the way Amitive refers to what it does.

And now, like the MES provider, Amitive is experimenting with new delivery pricing models. Users, for instance, can now choose the operating environment that best suits their needs. Amitive will:

Install the software behind a customer’s firewall, but manage it remotely, or ….

Install it at Amitive’s data center and manage it from there, or ……

Install it at a third party cloud computing provider of the customer’s choice.

In addition, Amitive has created a proprietary technology that allows a customer to dynamically scale the resources it’s using – and paying for – up or down depending on the computing needs. This way, you’re only paying for the resources you utilize rather than having enough resources to meet your peak activity, much like the electric company only charges for the amount of electricity you use.

“The advent of cloud computing is going to accelerate more supply chain projects,” says Rollings. “But it’s still going to come down to what kind of business benefit does it bring.”