Virtual Integration involves linking different applications, databases, and locally and globally distributed systems in such a way that they work together seamlessly and are easily accessible from a user's perspective. It is the integration through the whole value chain made up of loose affiliations of companies, organised as a network, where physical assets are replaced by information.
This is the driving force for GRID, since the core concept of GRID is to seamless integrate geographically distributed computers,databases, instruments. It is able to provide a technical platform to perform Virtual Integration.
- ever more demanding customer requirements: not only concerned with reduced costs and shorter lead times, but also increasingly focused on requirements for product and service offerings tailored to an individual customerâ€™s requirements.
- ever increasing competition: not only because of easier market entry, enabling new entrants to steal significant market share at the expense of unresponsive existing suppliers, but also because e-business now gives opportunities for customers and suppliers to bypass traditional supply chain structures.
- ever increasing volumes and velocity of information: the requirement to gather, process and act on massively increasing volumes of information in a rapid and intelligent manner.
- Fast development of Internet and the Worldwide Web techonology: The Internet has provided the universal pipeline for distributing information anywhere. The Worldwide Web has provided a new universal browser that allows information to be displayed on any client platform. The Internet and the web, enabled by global standards for protocols and application development languages, have provided a new universal architecture that simplifies the distribution of information.
- Network Bandwidth
- Increasing Use of e-Commerce
- Business Process Reengineering
- External Barriers: most organisations currently exist as islands of information. More often than not, information is used as a tactical competitive weapon against suppliers, with the result that the whole supply chain operates at a sub-optimal level of efficiency.
- Internal Barriers:
- Cultural Resistance: Despite all the work on business process re-engineering during the last ten years, most companies continue to be organised in functional silos.It is still all too common for functions to be measured against a set of stand-alone performance metrics that encourage adversarial behaviour across the internal functional boundaries.
- Lagacy Systems: On the technological sight, different functional units maintain a mix of platform environments:both package and legacy applications. Many also operate embedded process control applications that are incapable of integration with higher level transactional processing systems.
Through virtual integration, people/companies are no longer restrained to stay/come to in one physical place to do business: the corporate department can be dispersed anywhere in the world as long as it is best for fulfilling its duties; Institutions from different part of the world(suppliers and customers) work seemlessly as a whole to carry out huge tasks too large, too complicated for the capability of either side; Information scattered around the world is readily available in diversed viewpoints for different users of the integrated system. It allows company to exploit the new channels and leverage increased geographic access better than their existing competition and the new market entrants. The key to success is now about efficient management not only of the physical flows but also the information flows.
An example of this paradigm is what has happened in the automotive sector. Today the vision for most automotive vehicle manufacturers is to become virtual companies, owning only the brand and the customer. The design, system development, product sourcing, logistics, and even final assembly can all be outsourced to supply chain partners. Increasingly the goal is to replace physical assets with information in such a way that every member of this extended supply chain benefits. This forces the move from an environment of â€˜hard wired integrationâ€™, where relationships are arms-length and adversarial, even across functional boundaries within the organisation, to an environment based on 'negotiated sourcing', where non-core activities are outsourced and collaborative partnerships are the norm.
Cisco Systems, Inc
Historically, the trend among companies in the manufacturing sector has been to do everything in-house, to be "vertically integrated". This model is being challenged, driven largely by the need for economies of scale and greater asset utilisation, and the need to be on-time in the market with products. This need has created specialized companies across various horizontal layers. The Internet is helping tie-in these companies into closer companies, to create "virtually integrated" companies.
It is this virtual integration across the supply chain which helps companies like Dell and Cisco outsource much of their manufacturing, and focus primarily on design and marketing. And this business model has spawned a relatively new industry called Electronic Manufacturing Services (EMS). EMS companies offer a vast array of products and services to accelerate time to market and time to volume for a broad range of OEMs. In doing so, EMS companies allow OEMs to reduce total costs, increase cash flow, conserve capital and focus on their own core competencies such as product design and marketing.
Moreover,the Internet has cut geographical barriers to do business, and with supply chain management and optimization software made virtual integration easier.
Thanks to virtual integration, closed business systems are giving way to collaborative relationships. B2B ecommerce is not just about finding the cheapest supplier halfway across the world; it is about using technology to build trust with suppliers, and deepening relationships with these trusted parties.