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Opting for Oracle Cloud proved to be a practical and less costly alternative to traditional on-premise systems after global supply chain services provider APL Logistics separated from its parent company Neptune Orient Lines (NOL).
The move had helped put APL Logistics squarely on the digital transformation journey, as it recognised that reinventing its operations is critical to sustaining and staying in business, said May Chew, CIO at APL Logistics.
The foremost priority was to meet increasing customer expectations, which can be summed up as expectations of better service and goods delivered faster and more flexibly, and at a low cost.
Another challenge is the increasingly complex supply chains due to globalisation and the growth in freight volumes. A finished product that could be manufactured far from the retail market is likely to make multiple stops along the way from raw materials to its final state.
APL Logistics realised that adopting the right strategy would be crucial to business success. But first it had to untangle its IT systems from NOL, a “disruptive process”, and establish its own separate systems, while continuing with business as usual and ensuring customers were in no way impacted.
The supply chain services provider was clear that its business goals were to streamline its service offerings across multiple platforms, to improve speed of service delivery, scale up and to cut costs. As it worked to migrate the supply chain, enterprise applications, and other corporate systems, APL Logistics considered which systems should be shifted to the cloud.
The shift to cloud
Before the split from NOL, much of APL Logistics’ IT systems were on-premise, where it owns the hardware and infrastructure to store and compute data. The shift to cloud computing would mean a less complicated and costly approach as APL Logistics would not have to spend a lot of money establishing its own IT infrastructure and buying IT equipment.
Chew said the target was to reduce APL Logistics’ expenditure on infrastructure by at least 10% with the move to the cloud. Currently, it spends up to 30% of its $60m IT budget each year on infrastructure.
APL Logistics started by moving the domestic portion of its transport management system – which deals with planning, execution and optimisation of the physical movements of goods – to the cloud.
May Chew, APL Logistics
This was followed by its enterprise resource planning (ERP) system, electronic data interchange, infrastructure, human resources system, customer relationship management system (CRM) and disaster recovery.
According to Chew, cloud computing offers the assurance that APL Logistics’ IT systems can easily scale up or down, or add new capability to keep pace with changing business needs. Another benefit is that its systems would be updated with the latest patches.
However, not everything is suited to the cloud. While the cost savings of moving to the cloud were especially attractive in an industry where profit margins can be thin, the decision to shift depends on other factors.
“Deciding what to move to the cloud is not an answer you get overnight. You have to look at your future state and decide if you are going to sunset old systems,” said Chew.
“I’m very supportive of cloud for corporate systems, and for systems you don’t need to customise. Systems that need to scale, testing proofs-of-concept and systems that have less impact to the business can be moved to the cloud.”
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While APL Logistics is shifting the domestic portion of its transport management system to the cloud, it plans to wait and see how that pans out before deciding if the international piece is a good fit for cloud computing.
Technologies that have proven to be the “secret sauce” or a competitive differentiator, is likely to remain on premise.
One such technology is ShipmentOptimizer, APL Logistics’ customer-facing automated shipment planning tool that was developed with Oracle, based on Oracle’s Transportation Management System. This helped the company automate complex planning and identify the optimal mode and route for each shipment.
Another consideration is to ensure that the user experience is good with cloud-based applications, and unaffected by latency. Such problems can be magnified for cloud service communications, as latency issues may crop up in countries like India, as well as China which monitors all traffic traveling into the country, hindering network performance, said Chew.
Despite the opportunities and benefits of moving to the cloud, challenges remain.
“Moving to cloud requires a big mindset change from traditional IT – how do you find the right talent given the cloud skills gap?” said Chew.
The cloud may offer the convenience of a one-stop shop, where IT infrastructure and applications are on a single platform, doing away with the hassle of having to deal with different suppliers. However, a consideration is the possible trade-off against the advantages of best-of-breed systems.
Security of data and transactions in the cloud is another key concern, as APL Logistics’ wide geographical reach and diverse supply chain connections means the shipment of goods will involve data transfer between multiple stakeholders.
An organisation cannot risk a security breach where this shipment data is hacked into and manipulated, which can result in delayed shipment or even wrong deliveries. Another undesirable scenario is if hackers gain unauthorised access to the company’s client data and other confidential data.
Automation and blockchain
Besides the cloud, APL Logistics is looking to innovate with other technologies. It is exploring the use of emerging technologies like artificial intelligence and machine learning, as well as robotic process automation to deliver better business outcomes.
For instance, the company faced the problem of having to print invoices in multiple languages, a manual process that is error-prone and time-consuming, involving 17 steps and multiple screens to ensure completeness from various sources.
An automated work process powered by an invoice bot has enabled invoices with Chinese characters to be printed in just one or two steps. Translations to local languages are also automated, with formats standardised.
May Chew, APL Logistics
The aim is to do away with printed shipping documents, and the relevant data is shared using blockchain technology. APL Logistics is also collaborating with Oracle on a blockchain prototype to improve the process of complex shipping documentation.
Blockchain holds the promise of capturing a permanent record of transactions every time a product changes hands. Such information stored in a distributed ledger that records the transactions will improve security and transparency as each transaction is validated and recorded.
APL Logistics is also looking at other technologies like chatbots and mobility applications to enhance collaboration, as well as application performance monitoring.
“There is always room for improvement,” said Chew. “As we finish our transformation after the divestiture, we need to innovate to speed up our digital journey and transform to meet the evolving demands of our customers.
“Currently, some 8% of our IT budget is spent on innovation. The plan is to get it to 15%.”