Cloud Solutions in Manufacturing An advice about how support can be accomplished through cloud solutions to the operational business processes in the manufacturing market. MSc Thesis Management Studies Chantal van Dijke April 2014 Cloud Solutions in Manufacturing An advice about how support can be accomplished through cloud solutions to the operational business processes in the manufacturing market. MSc Thesis Management Studies Chantal van Dijke – 910901210050 April 2014 Supervisors Dr. J. Trienekens, associate professor in chain and network management, Wageningen University Dr. D. Dentoni, associate professor in agribusiness management and strategy, Wageningen University Commissioners R. Zondag, principal business consultant, Atos Consulting J. Thijsse, senior business consultant, Atos Consulting The support of cloud solutions in manufacturing List of Acronyms B2B business-to-business CIO Chief Information Officer CODP customer-order-decoupling-point CRM Customer Relationship Management ERP Enterprise Resource Planning GB gigabyte IaaS Infrastructure-as-a-Service IT information technology JIT just-in-time MES Manufacturing Executive System MTO make-to-order MTS make-to-stock NIST National Institute of Standards and Technology PaaS Platform-as-a-Service PLM Product Lifecycle Management SaaS Software-as-a-Service SCM Supply Chain Management 2 The support of cloud solutions in manufacturing Abstract In this report is studied how support can be accomplished through cloud solutions to the operational business processes in the manufacturing market. The aim of this study was to create a better understanding in the developments of cloud solutions for the manufacturing market. Extensive literature research is performed about IT systems and its functions, three defined types of manufacturing markets (process, discrete and consumer goods) and cloud solutions and their characteristics. After the literature study, an empirical study is executed by conducting interviews with manufacturing companies who could be classified in the defined types. The results showed most important requirements and motives for implementing cloud solutions. The results show that the characteristics availability and flexibility of cloud solutions are indicated as important in the decision making of cloud solutions. The availability refers to the cloud solutions which are available anywhere, anytime, anyhow. The flexibility refers to the scalability of cloud solutions and the mitigation through the facilities provided by the cloud provider. The characteristics security and performance of cloud solutions are suggested as aspects which should be improved. Furthermore, the scalable model and cost savings are indicated as valuable aspects of cloud solutions also. Most companies plan to (further) implement cloud solutions. Companies in discrete manufacturing seem to be most progressive in implementing cloud solutions, while companies in consumer goods are most conservative. Key words: cloud, cloud computing, cloud solutions, cloud characteristics, manufacturing, IT systems, operational business processes, process industry, discrete industry, consumer goods industry 3 The support of cloud solutions in manufacturing Preface Dear reader, Hereby, I would like to present my Master thesis. This thesis is part of my Master Management, Economics & Consumer studies. It is conducted at the chair group Management studies and in cooperation with Atos Consulting. This thesis is the result of a six month research which has been carried out in the period from October 2013 until April 2014. Atos Consulting, an international IT and business consultancy organization, has provided a Master thesis subject about cloud solutions in the manufacturing market. The research focused on how cloud solutions can give support to operational business processes in manufacturing markets. Both, the core IT systems and cloud solutions are researched and analyzed. The empirical research provided the possibility to research the current state of the implementation and attitude of manufacturing companies towards cloud solutions. This research would not be possible without the guidance of several people. Hereby, I would like to thank my supervisors from Atos Consulting, R. Zondag and J. Thijsse and from Wageningen University, Dr. J. Trienekens and Dr. D. Dentoni who all supervised me. They all helped me whenever necessary. I would also like to thank H. van Gestel and F. Seele for providing information and knowledge which helped me in obtaining information to answer the research questions. I would also like to thank F. Kuitems, R. Verfuurt, J. Speek, L. Acda, J. Bremer and R. Zondag of Atos Consulting for contacting the selected manufacturing companies to request for an interview. Finally, I would like to thank all respondents who were willing to participate in this research by answering the interview questions. Without them this research would not be possible, their sharing of knowledge was of great value to my research. Chantal van Dijke Wageningen, April, 2014 4 The support of cloud solutions in manufacturing Executive summary Cloud computing is seen as a current trend in the IT business. The cloud market is a developing market, through the growing business opportunities which it provides. Cloud computing changes the way industries and enterprises do their businesses. The manufacturing industry is one of the industries which is changing through smart technologies, such as cloud computing. The high rate on which IT technology changes, increases the pressure on technology service parties which have to come up with useful cloud solutions. Atos, which is an international information technology services company, is one of these service parties who are involved in developing cloud solutions. Not only service parties are changing, more and more manufacturing companies have reserved a budget assigned to cloud computing. This research is conducted for Atos Consulting, an international business and IT consultancy. The purpose of this report is to give an advice to Atos Consulting about how support can be accomplished through cloud solutions to the operational business processes in the manufacturing market. This research aims to create a better understanding of the developments in manufacturing markets regarding the implementations and motives to choose for cloud solutions. The future perspective is also included in this research. First, a literature study is performed about IT systems and its functions, the manufacturing market which is separated in three types (process, discrete and consumer goods manufacturing), the characteristics of cloud solutions and various cloud solutions for IT systems. Literature shows that Manufacturing Execution System (MES) and Enterprise Resource Planning (ERP) systems are crucial in businesses while the systems Supply Chain Management (SCM), Product Lifecycle Management (PLM) and Customer Relation Management (CRM) are responsible for specific components in businesses. Depending on the type of manufacturing market, the focus is on various elements of the functions of IT systems like customer support and product information exchange. Positive and negative elements of cloud solutions are defined also. Positive elements are the only- pay-for-what-you-use model, low investments and agility of cloud computing. An element of cloud computing which need to be taken into account when implementing cloud solutions is the security. Defined opportunities are the acceleration of adoption, effective use of IT technology and reduction of the carbon footprint. Most important defined risks are in privacy, security and trust. In order to indicate the current situation and motives which are taken by manufacturing companies regarding cloud solutions, an empirical research was conducted. The empirical study consisted of interviews with nine manufacturing companies in the defined types of manufacturing markets. The interview questions were built to indicate the value, requirements, performance and reason to use cloud solutions. The empirical study is used to validate parts of the literature study like the defined characteristics, opportunities and risks, and to research how cloud solutions support operational business processes in practice. The results show that the characteristics security, low investments which need to be done and only pay for what you use are seen as most important for the interviewees. The security is most mentioned as priority of cloud solutions also; however the performance of this aspect should be improved. Therefore, this aspect is at this moment a constraint as it negatively influence the implementation of cloud solutions. Furthermore, the lower costs are not the main driver for implementing cloud solutions but still mentioned as third most frequently mentioned requirement. The mobile availability and the scalable model of cloud solutions are seen as most valuable elements. Companies choose to implement cloud solutions of well-known and stable cloud providers to be sure that the cloud provider will not suddenly be bankrupted and able to provide real-time updates. The results also show that most companies already implemented cloud solutions and plan to implement more public and private cloud solutions in all types of IT systems, except MES, in the future. To conclude, cloud solutions give support to the operational business processes as they possess the required functionalities for the company. Cloud solutions possess elements which IT systems do not 5 The support of cloud