“Change is the law of life. And those who look only to the past or present are certain to miss the future,” John F. Kennedy once said.

I take this quote as a warning against fearing change and supply chain managers should do the same. Supply chain management (SCM) is being challenged from various sides, and the consequent changes are likely to transform the industry before the end of the decade.

Challenges of traditional SCM

The development of the cloud, globalization and tool-based optimization solutions are challenging the status quo for supply chain managers.

From a technical point of view, the development of the cloud has made Supply-Chain-as-a-Service a feasible option for solutions providers as the typical organization-centric SCM companies, processes and software solutions fail to meet the needs of today’s complex and increasingly dispersed supply and demand networks.

The common tools and processes are not sufficient to effectively manage extended supply chains and globalization’s cost benefits, and the typical “silo optimization” between internal and outsourced SCM functions has a negative impact on end-to-end performance.

Often, SCM companies will use manual and spreadsheet-based tools, raising costs and reconciliation time while driving down efficiency and quality of service. On the other hand, adopters of more complex SCM solutions are often frustrated by high implementation and operating costs of the advanced tools.

Even if such “advanced tools” are in place, they may be poorly used because organizations lack the necessary experience and expertise to run, adjust and orchestrate the complex tools to meet their needs. As such, SCM performance often degrades over time – even after successful implementations.

The rise of SCaaS

The challenges to supply chain management as a core business function have opened the door for Supply-Chain-as-a-Service to fill the gap.

While it may seem counter-intuitive, as supply networks become more complex, dispersed, and fluid, SCM becomes less of a core business competency and more of a technical and organizational evolution supporting the needs across supply networks.

 This may seem hard to grasp, but so too was the idea that global brands (think computers and smartphones) would take their logistics and more recently their manufacturing out of house. We see where that has gone.

As outsourcing and global competition continues to drive the evolution of supply chain management, companies’ needs to understand more nuanced networks with increased agility and resilience will move companies to adopt SCaaS.

What the Future Will Look Like

Supply chain management is a pan-enterprise discipline that requires both technology and process know-how that most organizations do not have or cannot afford to incorporate.

On-premise SCM solutions will go out of style as companies turn to SCaaS for a more sustainable and effective way to manage their supply and demand networks.

That change could come soon. Publications such as the Harvard Business Review and analysts from McKinsey&Company have indicated we can expect to see SCaaS emerge as a significant business model by the end of the decade. Here’s what to expect:

• Non-core SCM competencies will be outsourced to an SCaaS partner who acts like an extended wing of an organizations’ SCM department. Just like today’s third-party logistics providers, their focus will be on end-to-end supply chain performance and commitment to end-customer value.
• Organizational focus will be on managing expectations and setting clear requirements for their SCaaS partners, leveraging the partners’ scalability, flexibility, and expertise to set up and operate supply chains.
• SCaaS providers will leverage an open cloud-based plug-and-play platform that allows them to address their customers’ supply chain needs (e.g., visibility, planning, and execution) across the extended enterprise network with surgical precision.
• Typical offerings will include end-to-end planning, visibility, and KPIs; integrated production, transportation, and procurement planning; planning model adjustments; inventory sizing and positioning; and general advice on process and solution improvements.

Companies will require a platform-based, comprehensive data layer where different tools are orchestrated to fit diverse customer needs (e.g., demand planning, sales planning, supply planning, inventory optimization).

While that is a starting point, it’s not a stretch to move to a place where a universal data layer provides organizations the ability to pick and choose SCM tools the way people pick and choose apps from Apple and Google today.

One can imagine that this would be an exciting workplace and further improve the quality of a SCaaS provider during the battle for top talent.

It’s not a question of if, but rather when.

Dr. Michael Keppler is the chairman of the Steelwedge Strategy Advisory Board. He founded ICON-SCM in 1992 and is an expert in helping companies build differentiating capabilities for enterprise supply chain processes.