8 ways the cloud is a no-brainer for manufacturers

Cloud computing: Some people still debate the merits of using cloud computing in manufacturing, but there are specific cases when a cloud solution is the obvious choice. Here are eight reasons why cloud computing works for manufacturers. Cloud computing is the quickest, most economical way to make things happen in a hurry.

By Mark Humphlett March 27, 2014

Some people still debate the merits of using cloud computing in manufacturing, but there are specific cases when a cloud solution is the obvious choice. Many controversies about using the cloud come from outdated information about cost. But in the last few years, leading vendors have dramatically dropped the cost of running cloud-based solutions. Those economies add to the savings you gain from not having to build and support data centers and IT staff.

Certain situations make cloud-based solutions the only rational option, including the following eight situations.

1. Mergers and acquisitions

Pressure for top-line revenue growth makes any number of merger and acquisition (M&A) based strategies inevitable for many manufacturers. But a successful M&A growth strategy depends on the smooth integration of new organizations. Rather than trying to harmonize many different hardware platforms and data centers, it’s much quicker to adopt cloud solutions to create common ground between organizations in a way that offers the capabilities everyone needs. 

2. Divestitures

Spinoffs have the opposite problem of M&As. When the IT resources of the old parent organization are no longer available, the spinoff needs a quick way to replace IT capabilities without adding new cost burdens and without the distractions involved with building an IT organization from scratch. In many cases, spinoffs happen so quickly that there’s simply no time to figure out how to build a data center or implement new business systems.

A cloud-based IT solution gives a newly divested company the support, speed, and intelligence to go on functioning efficiently, sometimes more efficiently than when they were part of the parent company. 

3. Offshoring, near-shoring, reshoring

The economic pressures that drive decisions to move production offshore change frequently. The offshoring trend actually planted the seeds of its own demise, in some ways. Not long ago, low labor costs put many companies under pressure to move manufacturing to China because competitors were doing so to gain a cost advantage. Over time, the explosion in Chinese manufacturing pushed up labor costs enough to justify near-shoring or reshoring. Each trend created a demand for new ways for manufacturers to configure IT infrastructure to best serve the issues they faced. Cloud computing allows manufacturers to put computing resources where they’re needed quickly and economically. Even more important, cloud technologies allow companies to employ solutions that are better focused on the needs of each location.

For example, when a domestic manufacturer moves production offshore, the domestic organization has effectively switched from the manufacturing business to the distribution business, a change that involves a whole new set of procedures and priorities. Reshoring and near-shoring reverse that process, but the need to rapidly implement a cloud-based solution to address new priorities remains critical. 

4. Two-tier company structures

Many manufacturing companies are owned by larger parent organizations whose core transactions systems, including enterprise resource planning (ERP) and financial management applications, are built, above all, to serve the financial function. Frequently, those systems address only the specific demands of manufacturing with a great deal of expensive customization, requiring time-consuming modifications that fail too often.

Cloud-based manufacturing software can be brought online rapidly to serve the specialized demands of manufacturing. In addition, software for manufacturing in a specific industry can be brought on as a cloud service when the specific demands of a unique industry, such as paints and coatings or metal fabrication, differ widely between divisions of one company. 

5. Strategic alliances, partnership

Going at it alone isn’t necessary in industries that need to rapidly satisfy new customer requirements or keep up with rapid innovation. Companies that establish strategic alliances or partnerships with companies in other industries often prefer to keep the joint operations distinct from other parts of the business. To maintain clear lines of authority and accountability, it’s sometimes worthwhile to set up separate software solutions just to handle the joint operations. That way both companies can clearly see the value of the joint operation and nobody will feel like their contribution isn’t suitably valued. It also helps clarify whether a joint operation is genuinely succeeding on its own merits, or if it’s time to pull the plug.

When pulling the plug is called for, shutting down a cloud solution is just that simple: flip the switch and walk away. There’s no need to figure out how to dispose of unneeded data center resources. 

6. Special projects, fast turnaround

In a world of compulsive early adopters, viral business phenomena, and instant communications, it’s not unknown for a company to need to turn rapid response into a competitive differentiator. Cloud technologies can be rolled out at a speed that would have been incomprehensible only a few years ago, but could be essential today.

Internet phenomena turn obscure memes into household names in hours, and drive consumer demand in ways that demand cloud-speed response. If a company cultivates the ability to seize a rapidly trending opportunity and fulfill consumer needs while the moment lasts, that company will enjoy enormous opportunity.

7. Test environments

Testing is an essential phase of any technology rollout, but it tends to incur costs for hardware, facilities, and support, that become redundant once testing is complete. Many business software solutions can be implemented either as cloud solutions or on-premise solutions, which allows a company that plans an on-premise implementation to use the cloud as a test environment without disrupting the daily operations of the business.

8. Expansion, new geographies

Because of the high cost of shipping and the need to meet rapidly consumers’ increasing demand for speed, many companies now build plants and distribution centers close to areas of maximum consumer demand. That means rolling out information systems rapidly and economically enough to bring new facilities online quickly.

Cloud solutions give companies the flexibility to offer that kind of rapid, comprehensive support for a lower cost and in a shorter time than they ever could before. It also reduces risk, by lowering the fixed costs involved with building locations that might need to be moved again in response to new sources of customer demand.

Above all, cloud computing is about speed. In an economy where manufacturers have to be ready to change strategies and adopt new tactics faster than ever, cloud computing is the quickest, most economical way to make things happen in a hurry.

– Mark Humphlett is industry and solution strategy director, Infor. Edited by Mark T. Hoske, content manager, CFE Media, Control Engineering, mhoske@cfemedia.com.



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Key concepts

  • There are 8 specific ways when a cloud solution is the obvious choice.
  • Cloud computing is the quickest, most economical way to make things happen in a hurry.
  • Other reasons include: Mergers, acquisitions, divestitures, alliances, special projects.

Consider this

How can cloud computing improve your agility and asset management?