Role of Cloud Computing in Logistics in 2022 - Benefits & Limitations

  • Assim Gupta
  • Jan 19, 2022
  • 6 Min Read
cloud computing in logistics - benefits and limitations

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Assim Gupta

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Assim Gupta is the CEO and Founder of Closeloop, a cutting-edge software development firm that brings bold ideas to life. Assim is a strategic thinker who always asks “WHY are we doing this?” before rolling up his sleeves and digging in. He is data-driven and highly analytical, yet his passion is working with teams to build unexpected, creative solutions that catapult companies forward.

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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.

Important Statistics To Know

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

From 2016 to 2021, the main drivers of the market growth were the rise in awareness about the benefits of cloud computing in logistics & supply chains, reduced costs, better operational efficiency, etc.

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.

In this quick write-up, let’s explore both the pros and cons of cloud computing in the logistics and shipping industry. 

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 the businesses who 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 the 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, responding to demands faster, providing better customer service, and making adjustments in the 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 the 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 (AI). 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 the 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 cloud in logistic 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 is 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.

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 the 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.

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