Imagine your supply chain as a precisely tuned symphony orchestra, where every component must work in perfect harmony to produce success. Yet reality often delivers discordant noise and inefficiency. Where does the problem lie? The answer may be hidden in the cloud.
As enterprises increasingly turn to cloud-based solutions for greater flexibility and efficiency, a quiet digital revolution is transforming supply chain management worldwide.
The Irreversible Rise of Cloud Adoption
In today's volatile market environment, businesses require more agile and efficient supply chains than ever before. Accenture data reveals continuous growth in the global cloud services industry since 2010, reaching $370 billion in market size by 2020. Global public cloud services expenditure is projected to grow 18.4% this year, with remote work acceleration fueling this trend.
Accenture designated 2020 as "the defining year for cloud," recognizing its pivotal role in enabling remote work solutions and serving as the foundation for business continuity and growth.
Cloud-Powered Supply Chain Transformation
Supply Chain Management (SCM) encompasses broad logistics and operational functions, divided into Supply Chain Execution (SCE) and Supply Chain Planning (SCP). SCE manages warehouse systems (WMS), procurement, transportation (TMS), global trade, yard management, and labor management, while SCP focuses on optimization and strategy.
Gartner Research Vice President Bart De Muynck notes steady growth in cloud-based SCM over the past four years. In 2017, Software-as-a-Service (SaaS) accounted for approximately 30% of new SCM implementations, with on-premise solutions dominating. By 2022, this ratio is expected to reverse, with SaaS implementations surpassing traditional deployments.
Migration rates vary across SCM segments. De Muynck projects 62% of new procurement implementations will be cloud-based by 2022, up from 40% currently and 30% in 2017. SCE solutions follow a similar trajectory, growing from 30% cloud adoption in 2017 to over 50% projected for 2022.
Economic Drivers Behind Cloud Migration
The shift toward cloud SCM stems from multiple factors. During economic downturns, companies prioritize operational expenditure (opex) over capital expenditure (capex), as opex delivers faster value with fewer resource requirements. Rapid, simplified implementations have replaced lengthy on-premise deployments.
"Companies are deferring major capex software investments that demand significant time and resources," explains De Muynck.
Replacing legacy warehouse management systems represents another key driver. Many organizations still rely on on-premise systems housed in server rooms, with some reluctant to migrate data to the cloud. Convincing businesses to move physical servers to centralized locations or cloud environments remains challenging.
Transportation management has emerged as a cloud-first SCM application. To achieve optimal efficiency, TMS solutions must connect diverse carriers, trade partners, and customers, making this segment the strongest driver of cloud adoption in supply chain software.
Case Study: Castellini's Cloud WMS Transition
Castellini, a U.S. fresh produce distributor established in 1896, partnered with enVista in 2014 to implement a cloud-based WMS solution from Blue Yonder, replacing its legacy system. The transition, initiated in March 2020 amid pandemic uncertainties, was completed 90% remotely.
"The key factor in choosing enVista was their deep expertise, dedication to our requirements, and ability to deliver innovative solutions that transformed our entire operation," said Castellini CIO Dan Taylor.
De Muynck observes that simplified implementation and reduced costs drive cloud TMS adoption: "Some vendors have made TMS implementation and usage easier and cheaper. We see affordable cloud solutions that can go live within 30 days."
Sustained Growth Momentum
Capgemini North America Transportation VP William Brooks reports surging client demand for cloud SCM systems during the pandemic, as companies strengthened supply chain operations and maximized technology investments remotely.
"Cloud adoption continues its strong growth trajectory with no signs of slowing," says Brooks. "Companies have tested the waters and recognize it delivers as promised."
With 92% of organizations now running at least partially cloud-based systems (per InfoWorld 2020 data), earlier concerns about data security and control have largely dissipated. Lower upfront costs, reduced IT resource consumption, and easy scalability make cloud solutions increasingly mainstream.
Microservices: The Next Cloud Frontier
ARC Advisory Group's Supply Chain Research Director Clint Reiser highlights Manhattan Associates' 2020 launch of Active WMS, a cloud-native platform built on microservice architecture. This approach connects specialized applications ("microservices") that each handle distinct processes.
"This isn't just 'lift and shift' to cloud," explains Reiser. "The platform was designed on different infrastructure using interchangeable components."
De Muynck notes this architecture simplifies solution adoption and enhances vendor scalability: "Established vendors considering microservices may need to rethink their current application stacks."
Future Outlook: Accelerated Digital Transformation
Cloud adoption has helped stabilize the WMS market over recent years, as companies hesitant about major capex investments explore SaaS alternatives. Vendors responding with expanded cloud offerings have effectively "stabilized market revenue," according to Reiser.
As cloud dominance in supply chain software continues, 2021 and beyond will bring innovations combining AI, real-time visibility, and advanced analytics. Pandemic disruptions have intensified demand for these digital capabilities, sparking what De Muynck describes as "a race to implement these technologies across logistics operations."