August 30, 2023 | Supply Chain Strategy
From procurement and inventory management to fulfilment, logistics and distribution, supply chains have become increasingly complex yet vital for all businesses today. And as uncertainty continues to increase, there is an immediate need to streamline supply chain operations.
While many businesses understand the importance of leveraging technology in this endeavor, they do not have the required capabilities, resources and infrastructure.
The presence of multiple stakeholders in supply chain operations further complicates their problems.
How can businesses succeed in building resilient supply chains and thrive in a rapidly changing environment? Can they seek the assistance of an outside third party in this process?
Yes, they certainly can.
And this is how the supply chain as a service model came into being.
Supply Chain as a Service (SCaaS) involves the division of the supply chain into small chunks that can be outsourced to third parties. In this model, some parts of the process are outsourced to and supported by a third party.
Such a model leverages advanced technology and automation to enhance visibility, speed and accuracy across the entire supply chain network. It also allows a business to scale up their supply chains and take advantage of variable price structures and resources.
Small and midsized businesses as well as large enterprises can utilize the SCaaS model to access specialized service providers that have the required expertise and infrastructure. At the same time, they can avoid the costs and risks involved in developing vertical supply chains or undertaking all processes on their own.
Depending on the requirement, businesses can outsource several supply chain processes including procurement, warehousing, inventory management, distribution, logistics, transportation and order fulfilment.
Ideally, a business should first review its supply chain operations to identify core competencies and parts of the process that need to be optimized and should therefore be outsourced. They can then form collaborations with an outside partner that specializes in these processes and offers end-to-end infrastructure and technology.
Such a collaboration enables the business to optimize processes along with costs, services and associated risks. Also, while leveraging the SCaaS partner’s scalability and expertise, the business can establish clear requirements for setting up and operating supply chains.
Like a third-party logistics (3PL) provider, supply chain as a service enables a business to use third-party technology platforms.
The use of cloud-based software is key to the working of the SCaaS model. It can fit seamlessly into the model and offer better visibility. Often, SCaaS providers use an open cloud-based plug-and-play platform to meet their customers’ requirements of supply chain visibility, execution and planning.
In addition to technology, almost all functions of the supply chain including procurement, warehousing, distribution, fulfilment and transportation can be availed as an outsourced, on-demand service.
The SCaaS model can also allow companies with extra capacity to offer a portion of that capacity on the open market and maximize profits.
Over the coming years, an increasing number of businesses across different industries are expected to adopt the SCaaS model. In fact, the SCaaS market in North America is projected to grow at a CAGR of 7.5% and reach nearly USD 8 billion by 2025.
Leading players in retail, health care, life sciences and high-tech industries are increasingly deploying the model. Amazon, for example, has adopted the SCaaS model with Amazon Warehousing & Distribution (AWD). The solution addresses critical supply chain challenges and enables sellers to benefit from new, purpose-built facilities for bulk inventory storage and distribution. Likewise, Amazon’s fulfilment centers offer picking, packing and shipping services for retailers.
The tremendous rise in the use of online shopping, especially with mobile devices, is expected to accelerate the adoption of the SCaaS model.
Another key driver is the access to technology such as cloud computing, blockchain and the Internet of Things.
Original equipment manufacturers (OEMs), contract manufacturers and distributors too are adopting the SCaaS model in one form or the other.
Cisco and HPE, for example, have adopted “as a service” model for some of their physical products and corresponding supply chains. Likewise, a few contract manufacturers such as Celestica and Flex offer manufacturing as a service within their broader SCaaS model.
With SCaaS, not only can businesses access specialized service providers and variable price structures, but they can also scale up (or down) their supply chains when needed and adapt quickly to the changing market conditions.
Know how GEP can help you transform your supply chain process.