October 2003 | Commentary | Supply Chain Technology

Mind Your Own Business: Supply Chain Integration and Feedback

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In the 20th century, the process of control was formalized by Norbert Wiener who, through his concept of cybernetics, analyzed and applied the idea of feedback. Although he saw feedback as useful primarily to engineers, the idea has taken wing and come into all our lives.

For example, consider the delivery of steady heat through the simple, yet effective thermostat. Too hot, turn down the furnace. Too cold, turn it up—and all without a trip to the basement.

Feedback shows up in businesses beyond those involving power, heat, or refrigeration. Feedback is a key instrument in business and was important before anyone had so much as hinted at the existence of the supply chain.

The automobile business is a case in point. Auto companies know how to manufacture and sell cars. What they took time learning is how to set up a feedback system of information from their customers, asking questions such as: Do you like the new additions to our seating? Do you prefer less trim? Do you want better mileage?

They used this feedback to make marketing, design, sales, manufacturing, and bottom-line decisions. This meant they finally had to know what their business was. It was no longer just making cars and trying to sell them. It was creating a better product to serve their customers.

People discover what their business is in other ways. One such example is IBM. At one time IBM was convinced it was in the computer business. Marshall McLuhan, the media guru, convinced the company otherwise. He told IBM it was in the information processing business. McLuhan saw IBM's feedback loops and business processes even before it did.

The Word of the Moment

How does feedback and finding out what business you are in fit into supply chain management? We might start by admitting that integration is the word of the moment—and probably the year—in the supply chain business. The Supply-Chain Council and Supply Chain Review have promulgated the idea of supply chain progress in a set of evolutionary steps. These are, in ascending order:

  1. Enterprise integration
  2. Corporate excellence
  3. Partner collaboration
  4. Value chain collaboration
  5. Full network connectivity

Step 5—full network connectivity—is the nirvana of supply chain evolution and progress. What we can see without being a systems analysis expert is that each level up demands more integration of feedback information. The movement goes from functional process to intra-process, to inter-enterprise, to external, to total business system.

If we are really going to integrate information with the consistency of Wal-Mart or Microsoft we have to know how our partners function inside and out. We must know the parameters of their feedback streams and the way they deal with the information once in hand.

Let's put some number realities to this challenge. Wal-Mart has approximately 50,000 suppliers. Microsoft has more than 40,000 business partners. Both companies' success is dependent upon businesses and processes that they do not, in fact, own. They rely on either business partners or suppliers in nations all over the world.

Hard-Nosed or Loose and Easy?

How do we stay on top of all these interconnections? Do we become hard-nosed dictators? Or is loose and easy the way? Is it really possible to be dictators if we have no direct control?

We are dealing with far more complex relationships and forces than the heat thermostat. We cannot make business integration or processing decisions from just one reading. We will, at the very least, have to take continuous readings, and attach those to some predetermined algorithm that takes into account data such as context, season, geography, and demographics.

One lesson we learned from the business process reengineering era is that to best understand a process it is important to deal with those closest to it. Not just those in the company office, but also those in charge of processes for our partners. This is the only way to attack supply chain business process reengineering.

Our collaboration network therefore reaches out into the world in ways we never could have fathomed less than a decade ago.

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