Cloud Computing: A Game Changer To Logistic Companies

David Cheverton, CIO, Damco Distribution Services

Technology trends that will have significant impact on the logistics industry

Cloud computing has truly come onto its own. Cloud computing is where a company will have a 3rd party provider host their software systems at a remote location. The cloud providers are expected to provide not only server and storage space, but redundancy, infrastructure, fail over and disaster recovery as part of the price. Public/private networking is also part of the offering. The benefit of using a cloud environment is that part of the costs to run systems now moves off of the Balance Sheet as a depreciating asset and becomes an operating expense. This frees up capital for other uses. Servers, data storage, fire suppression systems, database backup systems, standby power generators, UPS, VMware and SAN devices are all necessary to provide software services, and are also very expensive to purchase. Providers like Dell, HP, Amazon, AT&T, IBM and Dimension Data are all providing cloud computing services at extremely competitive prices.

The Logistics industry in the US is a very predictable business with some very steep peak volumes. Spring fashions, back to school and Winter holidays are the primary retail peaks in the US. Logistics firms will see most of their business, and therefore profits, come during these peak times. If a Logistics company purchases server and database storage hardware to support their business, they need to purchase hardware and services big enough to handle the peak volume business. The peak volumes mentioned may last for a total of 10 – 13 weeks per year. That means the company has to purchase enough computer hardware with the capacity to handle 100% of the system transactions for only about three months of the year. The rest of the nine months, the hardware is not used anywhere near capacity and is "surplus" to the organization. In the cloud computing model, the business only pays for the computing actually used, and it is easy to make changes. In the above example, February is a mini-peak with the Spring fashion product. A business using cloud computing to host their systems can have thresholds set in the cloud environment where the CPU usage can be monitored and when the CPU usage goes above 80 percent for 72 hours, the cloud environment can be set to automatically spin up new processors to handle the additional capacity requirements. The same thresholds can be used on the back side of the peak, and when CPU usages goes below 80 percent for 72 hours, the cloud environment can then shut off the additional CPU capacity. The time delay between "we are running out of storage space again" and new additional storage space is cut from days and weeks to minutes and seconds

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