Supply Chain as a Service: Three Types and Three Opportunities

By Michael Dominy | April 13, 2021 | 0 Comments

Supply ChainPower of the Profession

Leading organizations are looking to exploit their assets and expertise to move beyond cost optimization and contribute directly to top-line revenue. Supply chain as a service (SCaaS) represents an emerging opportunity for CSCOs and their teams.

During this year’s Supply Chain Top 25 research and through focused interviews conducted during the second half of 2020, we found that companies in several industries have or are launching SCaaS. Thus far, there is more activity in the high tech and retail industries. However, we also see organizations in life sciences and healthcare tackling SCaaS.

  • High tech: Players from OEMs to contract manufacturers and distributors offer one or more forms of SCaaS. Of course, contract manufacturers such as Jabil, Celestica and Flex offer manufacturing as a service within the broader SCaaS umbrella. They and other contract manufacturers also offer other SCaaS such as sourcing and logistics. Distributors, including Avnet and Arrow, have a portfolio of SCaaS that extend into non-physical operational business processes. OEMs are looking at opportunities to leverage their supply chain expertise and as-a-service (i.e., cloud) technologies to offer supply chain business processes as a service to other brand owners. Many of the OEMs also have digital business models that are subscription or “as-a-Service” based instead of hardware centric. Cisco and Hewlett Packard Enterprise are just two of the OEMs that have shifted some of their physical products and corresponding supply chains to “as-a-Service.”
  • Retail: There are a variety of scenarios that retailers are developing and exploring. Those with private fleets see opportunities from full truckload between locations other than points in their value network to final mile fulfillment. Several are also examining ways to maximize their distribution centers by providing storage and fulfillment for others. Amazon’s Fulfillment by Amazon is an example of SCaaS in retail. Brand owners sell directly to customers but Amazon’s fulfillment centers pick, pack, ship and provide customer service. Another example of retail SCaaS is Woolworths. It elevated and extended its supply chain capabilities to other brands through a service offering called Primary Connect.
  • Healthcare and life sciences: Several of the healthcare providers such as Mayo Clinic have SCaaS offerings in the sourcing and purchasing area. Manufacturers are piloting subscription business models that remove inventory tracking and ordering for healthcare providers. A good example is Johnson & Johnson’s work with Rush University Medical Center to improve inventory management of sutures. The SCaaS monitors inventory in dedicated suture storage locations at point of use in the perioperative areas. All sutures are stored in designated areas equipped with weighted-bin technology specifically designed for sutures. The weighted-bin technology automatically monitors inventory levels and provides data analytics to support target setting and enabling replenishment planning and ordering. (see Healthcare Supply Chainnovator Finalists 2020: Supply Chain Provides Value From Laundry to Sutures With a Dash of Automation).

One of the challenges with SCaaS is that it means different things to different people. When we synthesized what we heard through the research, we identified three primary types or variants of SCaaS.

  • Assets and Contract Operations. This involves exploiting the capacity and capability of your operating assets such as warehouses, trucks or manufacturing sites to produce, deliver or service products for another company. In addition to established third-party providers such as contract manufacturers, branded manufacturers and retailers are exploring opportunities to commercialize operation capabilities and capacity by contracting with other brand owners.
  • Business Process as a Service (BPaaS). This involves using people and technology to manage one or more supply chain functions for external third-party organizations. In addition to third-party providers such as business process outsourcing and BPaaS providers, branded manufacturers and retailers are exploring commercial opportunities associated with offering their capabilities in the market. Companies with leading supply chain business processes expertise can sell their capabilities to a third party that is not a customer of their physical products.
  • Digital Business. This involves transforming the supply chain to support a new business model — especially those with an “as-a-service” sales and revenue model. To support these business models, the supply chain organization often needs to transform from physically moving material, parts and products to orchestrating data, people and digital flows across the value chain. Additionally, the forward or delivery-focused supply chain and aftermarket or post sale service and support processes need to be integrated and managed differently.

Combining the variants to deliver Vaccines as a Service

A solution provider offering “vaccine as a service” ensures physicians never run out of vaccines. The solution involves Internet of Things (IoT), cloud computing, inventory management, analytics, order management and payment processing.

The solution provider delivers a validated refrigerator to the physician’s office that will hold the vaccines. The initial stocking of vaccines is based upon the physician practice’s history and the types of vaccine typically administered by the practice. As the doctors dispense the vaccine, the IoT-connected refrigerator records the inventory reduction and communicates the information to the solution provider. Once the inventory drops below a target level, the solution provider orders more inventory for the practice and has it delivered from the vaccine manufacturer to the physician’s office. Through the SCaaS capabilities, the solution provider relieves the physician’s office of inventory tracking and ordering. The solution also improves sales and fulfillment for the vaccine manufacturer. Rush orders are reduced.

What’s your SCaaS strategy? I’d love to hear from you.

Michael Dominy
VP Analyst
Gartner Supply Chain
Michael.Dominy@gartner.com

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