“”Visible Commerce?” No thanks.”
That was the response I received from Alan, a client of mine, after I asked him whether he would consider this concept, which embraces the adoption of policies and practices that would bring about more transparency to his supply chain for both his customers and community. He was not having it.
Alan may not be thrilled by the concept of visible commerce, but many business leaders are. The term, coined recently by supply chain consulting and technology firm Basware, has been growing in acceptance mainly because it has defined a way of simply running a more transparent business by leveraging data and embracing openness.
According to Basware, visible commerce represents a “complete visibility across all the flows of money, goods, and services around the world. A state where transparency and data lead to more effective and ethical decision making – a better world economy for all.” Indeed, a recent report from Basware and Harvard Business Review discovered a clear link between commercial success and the visibility of supplier practices.
What does this mean in practice?
For a customer, it means knowing where the beans in your coffee come from, who farmed them, how they were shipped, what was involved in their preparation and how were they used to make the cup in your hand. It means understanding how all the parts that make up your smartphone or laptop were made, where they were made, and who made them to be sure that that there was no exploitation of people or resources in the process. It’s proof that your organic vegetables are indeed organic and that your environmentally friendly containers are actually that.
But for the makers of these products, visible commerce means something else: transparency. It’s a better system for controlling data. It’s a structure that – when properly applied – tracks in detail every transaction that makes up every component in a product. It’s a process that improves decision making, expands communications and provides faster access to the critical information needed to make those decisions. It enables better inventory management, stronger supplier relationships all whilst being compliant. It’s a way to provide more detailed costs, better tracking of margins and a powerful methodology for sharing this information with both shareholders and stakeholders. Most importantly, it’s an approach that – when implemented successfully – more fully demonstrates a company’s social responsibility and business footprint.
All of these factors are why visible commerce has been a growing trend amongst well-known brands such as Starbucks, Corning, Patagonia, Nike and Marks & Spencer as well as countless lesser-known brands and companies around the world.
But just know one thing: as powerful and beneficial it can be for some, visible commerce is not for everyone. Which brings me back to Alan.
Alan runs a 200-person company that, for the past 30 years, has purchased paper and film from suppliers around the world and then coated, cut, rolled and resold those raw materials as finished products to customers that to this day use them for packaging, labeling and as base lining materials in their products. It’s a boring, dirty business. But it’s a profitable one. Alan can sometimes resell raw materials purchased for as much as twenty times the price he paid.
“For my business, it’s all about the buy,” he’s told me more than a few times. “And I’m not telling anyone who I’m buying from.”
Sure, Alan’s customers value his company’s customer service and speed of delivery. But let’s be honest: in the end, it’s the price of his products that remains the most important factor for whether they decide to buy. Alan’s industry is competitive and he can easily get passed over if he quotes a job for as little as one cent more per pound than one of his rivals.
Which is why for Alan’s company – and many similar businesses – it’s all about keeping costs to a minimum. It’s about finding the right materials at the right prices. It’s about nurturing suppliers, building those supplier relationships and working better together. He has his favorite supplier sources, oh yes. And he vehemently protects their identity. He doesn’t want anyone to know where he got his products, who he’s buying from or what he paid. Given the nature of his industry, would you?
Alan’s material costs are critical for the viability of his business. Which is why when I recently asked him if he would consider applying visible commerce concepts to his business he looked at me like I had lost my senses. “I get why this is important for some industries,” he said to me. “But I can’t see it ever happening in this one. And even if it does, I wouldn’t trust my competitors to be fully transparent.”
But Alan might be missing the point. Good business decisions depend on clear insights. It isn’t just about the ethics and tracking where stuff comes from, it is about using spend data and the 100% real-time visibility that visible commerce brings to build stronger relationships with suppliers so in Alan’s scenario he can build these to maximise cost savings and process efficiencies, so he definitely would benefit from the Visible Commerce mindset. Visibility of your supply chain is the key to managing risk, and minimizing overheads. Who you choose to share that information with is up to you, Visible Commerce is a powerful competitive advantage which was proven in a recent survey of 779 global executives by the Harvard Business Review Analytic Services where it found companies that identify as “much more successful” than their competition consistently lead in visibility.
For now, certain industries are lagging behind and do not feel the pressure to comply. From what I see, supply chain transparency is still a long way off for many companies like Alan’s but there is no doubt it is an ambition companies should be striving towards for a better business future.
To understand more about Visible Commerce read Basware’s report with Harvard Business Review Analytics Services ‘Using Transparency to Enhance Reputation and Manage Business Risk’ https://hubs.ly/H0mYGn_0