When at the end of the First World War Henry Ford decided to build the Rouge plant in Dearborn, Mich., it sounded natural to co-locate all steps of the production process and have them owned and managed by the Ford Motor Company. Actually the ore and the coal came from Ford-owned mines and the wood and rubber from its plantations. Transportation was performed by Ford vessels and trains. Even the machines were built in-house. This was probably the ultimate in vertical integration; everything was under the control of a single company, and all decisions affecting the supply chain were in the hands of the same management team. It was easy to understand what happened; one just had to contact the right person in the organization.
There is a famous quote by Henry Ford regarding his company's Model T: "The customer can have any color he wants — so long as it's black." Since that time, customers have continually asked for more choice at lower prices, the market has become more global, competition more fierce, shareholders more demanding, technology innovation has increased drastically, and products are more complex to manufacture while their lifecycles are shorter. All these forces, combined with the tremendous improvements in communication technology, have resulted in a disintegration of companies' value chains.
An important side effect is that, where all decisions affecting the Rouge plant were taken in-house, company supply chains today can be affected by decisions taken within hundreds of supplier companies that do not all share a common objective because each of them are interested in their own profitability regardless of the others. Airbus, for example, works with more than 2,000 suppliers to build an aircraft. Many of those are involved from the start and invest in research and development (R&D) alongside Airbus without guarantees on the success of the program. To deliver a plane on time everything needs to line up perfectly. This is the headache with which Airbus supply chain management is confronted. Boeing is confronted with the same issue on its 787 program.
Understanding what happens in such an ecosystem no longer relies on inter-personal relationships between members of the same company but rather on interactions between different companies. As cost reduction programs have strained the relationships between suppliers and customers along those supply chains, gaining that understanding is often rather difficult to obtain. This is where the concept of "business visibility" plays an important role.
In this article, we will first describe what "business visibility" really means and how it can be implemented practically. We will then discuss how such an environment can be developed and what relationships are required with the partners in the ecosystem. Lastly we will review in more detail how targeting specific sets of information can provide major savings to companies running large ecosystems.
We could define business visibility as the "provision of the information and tools needed to run the ecosystem as an integrated business, allowing the fixing of problems in "real-time" and improving the performance of the end-to-end supply chain over time."
In the above definition we recognize three important functions:
- First, the collection of the information required to understand what happens along the ecosystem.
- Second, the identification of where issues are located so that they can be fixed in "real-time." We have to recognize that this term implies different time intervals for different companies. Depending on the processes and timelines of companies, "real-time" information about the supply chain may be required in minutes, hours or even days. A producer of high-volume electronic gadgets has another timeline than a manufacturer of railroad cars, for example.
- Third, the management of what is happening throughout the ecosystem and how things evolve over time to address potential trends and improve the overall operations of this supply chain.