Clouds Win Over Logistics
Maxim Berezin: “Many logistics companies turn to clouds to ensure, among other things, corporate information safekeeping and protection.”
According to the National Research University Higher School of Economics, a driver is the most common occupation in Russia. It's not surprising: we need not only to make or grow a product, but also to deliver it to a buyer on time through the logistics chain.
In classic economic models, only 5% of costs go to production, while 95% cover storage, warehousing, loading and unloading, and other logistics operations, with transportation accounting for 30-50% of total logistics costs. Reducing transportation logistics expenses helps cut the total cost of a product, thus boosting competitiveness and market share of both the manufacturer and its transportation contractor. Indeed, cost reduction benefits everybody, and IT systems, in particular, cloud services definitely can help achieve it.
Cloud scenarios for logistics
Logistics companies leverage a range of business-specific applications, such as Yard Management System (YMS) to manage warehouse area and vehicle movement within it, Transportation Management System (TMS) to manage cargo movement from origin to destination, or Warehouse Management System (WMS) to control handling of goods and materials at the warehouse. As these systems are crucial for their business, transportation companies prefer to develop and manage them by themselves.
However, IT infrastructure for those systems is a different story. Indeed, server, telecom, and engineering infrastructure for a data center is a large non-core business cost item for them. Therefore many transportation and warehousing companies increasingly go for Infrastructure as a Service to maximize cost efficiency. A company just needs to enter into an agreement with one or several cloud providers and regularly pay a subscription fee to be able to remotely manage business applications and the entire logistics chain within a single cloud platform. In other words, logistics businesses can outsource all technical routine to a cloud service provider, thus freeing up their own personnel for strategic matters, such as customer base expansion or new service development and launching.
The logistics chain consists of a consignor, carrier, and customer. They are usually different companies or legal entities within one holding company, each having its own business processes and e-document management system. When it comes to cargo, the chain participants need to take account of many parameters, including weight, volume, packaging type, vehicle, delivery time and conditions, possible damage, insurance, loading and unloading times. By moving to a cloud and using a single communication environment, the participants can unify processes bringing them to a whole new level.
Moreover, a cloud can help foreign companies ensure business continuity and comply with uniform IT industry standards. Thus, SK Operations, a logistics and supply chain service provider, consolidated all of its data, previously hosted on various sites including foreign ones, within a single Russian cloud platform, thus securing itself against possible regulatory claims.
Furthermore, clouds are popular with companies that develop their own logistics management applications. For example, one logistics operator that provides transportation and safekeeping services, decided to host its proprietary warehouse management system in CROC Cloud. As a result, in addition to traditional benefits such as reduced IT CapEx, quick start of a new business, and no need for large initial investment, the customer also gained access to cloud-based test environments, allowing it to promptly introduce changes to software code, with system improvements not affecting its performance.
Cloud-based data protection
Many logistics companies turn to clouds to ensure, among other things, corporate information safekeeping and protection, and thus reduce risks and stop worrying about IT environment support. As a result, they gain access to a redundant infrastructure designed and built to global standards, with uninterrupted service guaranteed even during equipment failure thanks to the second and sometimes the third backup data center.
Large cloud providers employ information protections covering entire infrastructure perimeter, including communication channel protection and DDoS attack prevention tools, check their cloud platforms for vulnerabilities every year (sometimes several times a year) with the engagement of independent auditors, and build isolated segments compliant with regulatory requirements for customers seeking maximum security for personal data they process.
To avoid corporate data loss, service providers create disaster-tolerant architectures based on a data center or a cloud, such as a cloud replica of a customer’s infrastructure to take over system operation in case of a force majeure on the customer's site. Such failure protection allows customers to pay only for the external resources actually used at the time of emergencies. In addition, many companies use cloud backup for the most critical data, which we believe to be a part of almost 80% of projects completed by CROC Cloud Services.
Cheaper and faster
Software providers and developers also take into account the growing demand of logistics companies for outsourcing, and thus offer multiple systems on a SaaS model as a way to reduce license costs. For example, there are automated systems that show optimal routes accelerating delivery; supply management solutions minimizing human error and improving the efficiency; as well as systems that track vehicles and ensure cargo safety during transportation (by monitoring temperature mode, carriage conditions, etc.) for real-time delivery control subject to traffic and other factors. CROC Cloud Services also offers SaaS solutions for logistics, including its transportation and supply chain management system.
For large logistics market players, automation has long been a key pillar of business management. Thus, the adoption of a cutting-edge platform for transportation and warehousing management helped Delovye Linii cargo carrier reduce its transportation expenses (by 10%), storage OPEX, and the number of vehicles (by 15%). Moreover, the company achieved 25% better warehouse throughput and 35% faster cargo handling.
Audit and optimization before migration
Before migrating applications to a cloud, it is important to analyze their architecture to make sure they will effectively operate in the new environment. Even though many developers now offer cloud-native systems, logistics companies still often stick to traditional systems that cannot be moved to a cloud as is because it may affect service performance and cause multiple errors. Audits have become an essential part of CROC Cloud Services’ business, as project results directly depend on timely system analysis and further optimization. Moreover, we are always ready to contribute to a system improvement during its operation in the cloud, including by way of process or system fine-tuning, scaling, or replicating. Thus, we can create duplicate WMS for newly established warehouses and branches, ensure unified system sharing, move a customer to a more powerful DBMS without stopping production systems, or perform a virtually seamless migration to a system by another vendor.
By the way, logistics system functionality can be quickly expanded by using a micro service platform that helps create a standalone requirements automation system that is independent from the core logistics system (ERP, WMS, or TMS). This way, integration can be completed rather quickly with minimum changes to the codes of core systems. Thus, we can either add the above functional modules or move non-standard functionality to an external environment for fine-tuning, while returning it to the core system module when necessary. A great example here is the implementation of CRM or SRM systems that work together with existing logistics systems. Even though CRM or SRM modules can be deployed separately, a micro service approach brings added business value, for example, in the form of a practically unlimited functionality expansion with centralized management, which will subsequently reduce target system integration and infrastructure costs.