Role of Cloud Computing in Logistics in 2023 - Benefits & Limitations

Cloud computing is one of the hottest technologies in this era of digital transformation that is making a huge impact on almost every industry today. The logistics and shipment industry is no different.

Businesses in this industry are adopting modern technologies to transform the way they operate, improve work efficiency, get insights into data, make data-driven decisions, and enable a great customer experience.

Undoubtedly, cloud computing in logistics offers a wide range of benefits if the right approach and strategy are followed. In this industry, the value of data is priceless because of the opportunities it can offer if decisions are made based on the data.

Companies in this segment are already using several software and platforms to manage workflows and data. However, the introduction of cloud computing in logistics management makes things all the more convenient and brings a long-term impact.

Cloud Computing in the Logistics Industry: What You Need To Know?

Cloud computing is like renting a computer or storage space that is not physically present with you. Instead, it's located in a remote data center and accessed over the Internet. cloud-based logistics meets all your business computing tasks without any burden of maintenance, security, or upgrades.

Logistic companies generate and manage a significant amount of data regularly, including shipment details, tracking information, customer records, and operational metrics. The volume of data can vary depending on the size and scale of the company.

In most cases, utilizing cloud services is recommended for logistic companies. Cloud services offer scalable storage, efficient data management, and flexibility to handle fluctuating demands. They eliminate the need for upfront investments in infrastructure, provide data accessibility from anywhere, and offer built-in security measures.

The Future of Cloud Computing in Logistics

Before knowing the role, importance, and pros and cons of cloud computing in logistics, it makes sense to go through some crucial past, present and future stats.

The cloud-based supply chain management market was valued at $3.26 billion in 2016 and crossed $8 billion in 2021, witnessing a growth of nearly 20% CAGR. The race for digital transformation has had a huge impact on the supply chain industry as well. Experts predict that the cloud supply chain market will grow at a CAGR of 11.09% till 2027.

The increasing adoption of cloud computing in logistics and supply chains has been a key driver, attributed to benefits such as cost reduction, improved operational efficiency, and heightened awareness of cloud advantages.

According to Mordor Intelligence, the cloud supply chain management market will reach nearly $9 billion by 2026, growing at a CAGR of over 11% from 2021 to 2026. This research also shows that reduced costs, efficiency, security, scalability, and easy integrations are the primary reasons behind the increasing use of cloud computing in the shipping industry.

In addition, the applications of cloud computing are also becoming prevalent in the supply chain through marine. The marine and marine management software market is predicted to reach $2.9 billion by 2026, up from $1.7 billion in 2021. This is a growth of over 11% CAGR from 2021 to 2026. The marine management software solutions are mostly relying on the cloud for automation of shipment operations, increased efficiency, data analytics, better collaboration, etc.

Benefits of Cloud Computing in the Logistics Industry

In the following paragraphs, we have highlighted a few benefits of cloud computing in the logistics industry. Let’s explore the same for better understanding and clarity of thoughts. 

1. Cost Saving

Affordability and reduction in operational costs is the primary reason behind the adoption of cloud computing in the logistics and shipping industry. Traditionally, businesses need to invest in infrastructure, hardware, and other equipment for the management of operations and storage of data. This involves higher costs.

In contrast, cloud computing brings everything online and eliminates the cost of infrastructure or hardware setup. Moreover, all sorts of data can be stored and accessed easily from anywhere. The use of Software-as-a-Service (SaaS) solutions is all the more in supply chain and logistics.

Numerous fast-growing businesses are implementing SaaS-based solutions to support heavy operational processes at relatively low pricing. Even businesses that have a tight budget can look forward to cloud adoption and gain the benefits it has to offer.

For instance, companies like Seaco and Matson have shifted their workloads to AWS cloud and are saving nearly 50% of their IT costs.

2. Remote Access to Inventory Information in Real-Time

The lifecycle of a supply chain in logistics starts with the inventory. In order to control the risks and increase profits, it is crucial to have real-time access to the capacity and other information about the inventory.

On this front, the cloud enables instant access to inventory information, allowing businesses to know about the fluctuations in pricing or products (if any), as well as know important figures like profit margins and sellers. When they know about things like fluctuations in real time, it becomes easier to respond to them on time.

To be precise, instant data access helps in boosting sales, respond to demands faster, provide better customer service, and make adjustments in orders.

3. Enabling Connected Supply Chain & Logistics Management

Since cloud computing is internet-enabled, all the data is available online, and all the connections can be made on the go using remote devices. Cloud enables connected logistics management, which brings together suppliers, vendors, as well as customers.

The communication and collaboration solutions powered by the cloud make it easier to take supply chain capabilities beyond physical boundaries. Furthermore, connectivity also facilitates dynamic provisioning, better utilization of resources, multi-tenancy, and efficient management of operations and tasks.

4. Make Data-Driven Intelligent Decisions

One of the most important benefits of cloud computing for logistics management is the ability to make decisions that are based on data analytics. It means that when the cloud is in use, it provides businesses with an analysis of a lot of data. This data can be analyzed by other cloud solutions, allowing them to make smart decisions, rather than just anticipating things and creating business plans.

Like other businesses, the logistics and shipping industry is already adopting solutions that are built on the cloud and make use of other modern technologies like machine learning (ML) and artificial intelligence development. Such robust solutions further help in gaining intelligent insights, optimizing performance, and driving new value. 

5. Improved Efficiency

In the logistics and shipment industry, the things that impact efficiency are human errors, missing deadlines, worrying about oversupply or undersupply, etc.

The introduction of cloud computing for logistics automates several processes and operations, which eventually reduces human errors. Moreover, it speeds up operations to save time and get things done without heavy supervision.

Companies can also set reminders related to the supply of products to get rid of undersupply and oversupply issues. Lastly, task automation and reminders also help in avoiding the problem of missing deadlines. 

Limitations of Cloud Computing in Logistics & Shipping

The cons or the disadvantages are quite negligible when compared to the benefits the cloud offers. Regardless of it, it is important to know the limitations as well when looking to adopt the cloud in the logistics business.

• Connectivity Concerns

Everything available on the cloud or accessible through the cloud needs an active internet connection for processing. You can’t access new data, share files with others, or get real-time updates when the internet connectivity goes down or is interrupted. The issues can also occur if you are in an area that has a poor connection, like warehouses, etc.

• Security Issues

While most cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud implement robust security solutions and standards, still data security is a concern in cloud computing. Mission-critical files and data can sometimes become open to breaches or system vulnerabilities.

• Vendor Lock-In

It is by far the biggest limitation of cloud computing. Once you have chosen a cloud provider and started using the relevant cloud development solutions, it becomes tricky to transfer to another provider.

This is because not all providers have similar platforms. If you are not satisfied with a provider, you will find it complicated to switch to another. This is the reason many businesses rely on a hybrid cloud or multi-cloud strategy.

• Control Limitations

Since the infrastructure, platforms, and software provided by a cloud provider are completely owned by them, the control customers have over the functionalities and solutions is limited. You can’t customize or personalize everything according to your requirements.

Cloud Computing: Type of Services, Deployment Models, and Solutions

So what types of cloud computing services can logistics and shipment services use? Here’s a detailed breakdown:

Infrastructure as a Service (IaaS): Think of IaaS as a virtual data center that can scale up or down on demand. There is no need to own and manage physical servers, storage, and equipment. You can use IaaS to access and use these resources over the Internet.

Platform as a Service (PaaS): PaaS makes business software development as hassle-free as it can get. With PaaS, you need not worry about databases, development tools, and operating systems. They are all available by design on the platform.

Software as a Service (SaaS): These are cloud-based apps tailored for specific business needs. For example, Salesforce CRM is a popular SaaS service. Logistic business owners can use SaaS to manage inventory, track shipments, or handle customer relationships. There is no need to install any software - everything is accessible through the internet browser.

Now that we have some idea about the cloud service types, let’s take a brief look at the different cloud deployment models:

• Private Cloud: It's a private cloud infrastructure managed by the organization or a third party. It’s ideal for sensitive data and applications.
• Community Cloud: It’s a shared cloud infrastructure between multiple organizations or individuals with similar interests or needs.
• Public Cloud: It's a shared infrastructure provided by a cloud service provider such as AWS- excellent for scalability and cost-effectiveness.
• Hybrid Cloud: A hybrid cloud is like having the best of both worlds. It combines the benefits of a private and public cloud by allowing you to use both.

Also Read: Oracle Cloud vs AWS: Make a Wise Choice as per Your Business Needs

Optimizing Logistics Management Using Cloud Computing

By adopting cloud supply chain management, logistics companies can experience significant benefits such as reducing operating costs by 10-20%, improving inventory accuracy by 20-30%, and increasing order fulfillment rates by 9-10%.

Furthermore, cloud computing offers real-time visibility into the entire supply chain process. With just a few clicks, logistics companies can get accurate and timely data for well-informed decision-making.

But what does this visibility result in?

• faster delivery times
• better customer service,
• and improved overall supply chain efficiency.

Overall, cloud supply chain management is a must-have tool for 21st-century logistics companies. It not only streamlines the entire supply chain but also gives companies a much-needed competitive edge in a constantly evolving business environment.

Cloud Computing for Logistics: Best Practices

As a logistic business owner, if you are using cloud computing for the first time, there are a few best practices to keep in mind:

• Choose the right cloud provider: Businesses should partner with a provider that has experience working with logistics and shipment management businesses and offers industry-specific solutions.
• Prioritize data security: With business-critical data stored and accessed in the cloud, it's crucial to prioritize data security. Ensure that the cloud provider has all safety and security measures in place.
• Monitor performance and adjust as needed: Once your cloud solutions are deployed,  It's important to regularly review metrics like system uptime, response time, and user satisfaction.

By following these best practices, logistics and shipment management businesses can leverage cloud computing for maximum growth and impact.

Wrapping Up

Cloud computing is a revolutionary technology that is making a massive impact on all industries, including logistics, shipping, and supply chain management. If used well with a solid cloud adoption strategy, it can bring numerous advantages and help businesses in logistics to put the leg on the accelerator of growth. Efficiency, cost optimization, real-time access to data, etc., are some significant benefits that can’t be ignored.

Feel free to contact us for a cloud computing consultation.