Integrated Supply Chain Management
Customer preferences have changed significantly over the years.
For instance, customers want to customize their delivery
experience by deciding when they want the product to be
delivered and at what time. They need to know the status of the
delivery at all times and request last-minute changes.
Also, as customers can now afford more, they’re demanding a
wider variety of products to suit their needs, forcing the supply
chains to become global.
However, the above events are making the supply chain more
complex and harder to manage. To meet the above requirements
and get an edge over competitors, businesses must opt for supply
chain integration.
An integrated supply chain connects all the stakeholders, offers
better operational visibility, and allows businesses to make data-
driven decisions. According to reports, companies with a fully
integrated supply outpower other businesses by 20%. Moreover,
companies that switched to integrated systems experienced
a 25% gain in productivity.
This blog discusses what supply chain integration is, the benefits
it brings, the challenges in supply chain integration, and how
businesses can overcome these challenges.
What Is Supply Chain Integration?
Supply chain integration is the process wherein all stakeholders
involved in creating, distributing, and supporting an end product
or service are seamlessly connected. The motive of an integrated
supply chain is to ensure everyone is working towards the same
goal while optimizing performance.
A supply chain is like an actual chain where all the links represent
the stakeholders like OEMs, suppliers, customers, shippers, etc.
The entire supply chain will weaken if these links (stakeholders)
aren’t seamlessly connected.
Supply chain integration helps strengthen the supply chain by
improving relationships among all stakeholders and by bringing in
more transparency and visibility. This empowers businesses to
make data-driven and well-informed decisions that positively
impact a business’s bottom line.
What Are the Different Levels of Supply
Chain Integration?
There are three levels of supply chain integration:
Operational: The first level of supply chain integration is the
operational level, wherein stress is laid on the optimization of
individual processes. Businesses focus on individual processes
without considering their impact on other processes.
Planned/Tactical: Planned/Tactical phase of supply chain
integration lays stress on integrated responsibilities and
authorities. The primary focus is on controlling and designing
material flow at an organizational level and the application of
information systems across the company.
Strategic: The strategic level of supply chain integration is
about fostering better partnerships, alliances, and relationships
among the stakeholders or supply chain members. It also
involves designing and integrating inter-organizational
information systems, processes between different companies,
and collaboration at a supply chain level.
Building Integrated Supply Chains:
Barriers to Overcome
Lack of Information Technology
Information technology plays a crucial role in building integration
in supply chains. It helps connect stakeholders and ensure a
smooth flow of information, finances, and materials among
suppliers, manufacturers, and other stakeholders, enabling
effective communication and collaboration.
Despite the benefits, information technology is not being
implemented and utilized in the best manner in most businesses.
As a result, it becomes hard for businesses to integrate different
aspects of the supply chain.
Lack of Information Sharing
Information sharing is essential for the integration of supply
chain. It offers the stakeholders in-depth insights and information
which can be used to make important decisions leading to low
costs and better resource utilization.
However, unfortunately, there is a lack of information sharing in
the traditional supply chains. This prevents the stakeholders in
the supply chain from coordinating with each other leading to
poor decision-making.
Lack of Trust
There’s a widespread lack of trust among the supply chain
members because of a lack of visibility and transparency.
Because of this, the stakeholders refrain from communicating and
collaborating effectively, which makes supply chain integration a
tough task.
Members in the supply chain, be it customers, suppliers, or
manufacturers, need to develop mutual trust, share information
and collaborate effectively. This is crucial for creating an
integrated supply chain.
Demand Distortion-Bullwhip
Another barrier in the supply chain interaction that businesses
need to deal with is the demand distortion-bullwhip. It’s basically
an unpredicted or unexpected demand that travels upstream in
the supply chain. The source is the customer who cracks the
whips and ripples are felt across the supply chain leading to
operational inefficiencies and impacting the product quality.
System Incompatibility
Supply chain integration involves integrating different systems
within an organization or a supply chain. However, to ensure
seamless integration, the systems need to be compatible with
each other. Unfortunately, as most businesses rely on obsolete
individual solutions for different processes, it leads to
incompatibility, and integration becomes a challenge.
Businesses need to opt for end-to-end supply chain management
solutions that allow businesses to handle all the operations from a
single dashboard. This way, system compatibility won’t become a
hurdle in supply chain integration.
Lack of Knowledge
Supply chain integration is a tedious process that requires a well-
laid-out plan. However, most businesses don’t have professionals
who’re skilled enough to pull this off. Businesses often try to
launch supply chain integration strategies without much research
and end up wasting time.
Companies need to either hire industry experts or opt for
automated supply chain management tools that ensure easy
integration to fight the lack of knowledge.
Cost of Integration
While supply chain integration brings massive long-term financial
benefits, there can be a decent upfront cost. For instance,
businesses might have to hire new resources or scrape off
different individual tools and invest in an end-to-end supply chain
management solution. And this can be costly.
Nevertheless, the long-term benefits of supply chain integration
outweigh the upfront expenses by a huge margin. Therefore,
businesses must invest in supply chain integration.
Challenges In Supply Chain Integration
Information and Operational Silos
Supply chain members often follow a management style wherein
different departments or business units don’t interact, creating an
operational silo. And as they don’t interact, communication,
collaboration, and information sharing are also limited, which
creates an informational silo.
This silo-based way of operating often leads to conflicts and
negatively impacts an organization’s productivity and revenue.
Higher Reliance on Manual Effort
The majority of businesses shy away when it comes to introducing
a change in their organization. And because of this, several
processes in the supply chain still rely on manual elements.
Route planning, freight procurement, documentation, compliance
management, and invoicing are some examples of processes that
rely on manual elements. And this leads to huge productivity
losses and inaccuracies as humans are prone to making errors.
Lack of Right Automation
While the market is full of automated supply chain management
solutions, businesses fail to embrace them. For instance, a report
says that fewer than 10% of the suppliers embrace automation
solutions. And this inability to opt for automation solutions leads
to inefficiencies impacting all supply chain members.
No Status Standardization
Different supply chain members operate differently and use
different terms to address the same processes. For instance, a
courier company might use the term ‘courier’ to address the
order, while the shipper might use ‘shipment.’ This can create
confusion and make it hard for different supply chain members to
collaborate and access information costing them a lot of time.
Lack of Process-Specific Metrics
Businesses need to closely monitor all their processes, from
procurement, product design & development to distribution, to
track inefficiencies and work on them. However, because of a lack
of smart supply chain management solutions, businesses are
unable to track individual processes that prevent them from
growing.
No Real-time Visibility
Real-time visibility into the operations, processes, and assets
(drivers and vehicles) is essential. Because with real-time
visibility, the managers can always have an awareness of how
every part of the supply chain is moving. This way, even if there’s
any contingency, it can be dealt with smoothly, ensuring
seamless process flow no matter what.
However, unfortunately, the majority of businesses lack real-time
visibility over supply chain operations. This minimizes the control
they have and leads to operational inefficiencies and higher
incidental costs.
Lack of Unified Data Analytics & Reporting
Most businesses lack data analytics capabilities. Because of this,
they’re unable to draw insights from the tons of data they
generate regularly. Even if they can analyze the data, the process
is highly inefficient and time-consuming as data is highly
fragmented and comes from different sources.
Businesses need unified data analytics wherein all the fragmented
data sources are merged into a central view. This way, a business
can visualize the data and draw useful insights from the same to
make better predictions and data-driven decisions.
Poor Collaboration and Communication
Active communication and collaboration are necessary for
creating a supply chain that is more robust, efficient, and
resilient. However, supply chain members often operate in a
siloed fashion, making it hard for them to communicate and
collaborate. And this leads to operational efficiencies, waste
production, inaccurate predictions, and an impacted bottom line.
What Are the Benefits of Supply Chain
Integration?
Promotes Visibility and Helps Deal with Information
Silos
Supply chain integration aims at creating better connectivity and
cohesion across the value chain, from procurement and
production planning to logistics. This way, businesses can connect
different processes and promote collaboration instead of letting
different processes exist in their own silo.
When different processes are connected, operational visibility is
enhanced. This makes all supply chain members aware of each
other’s duties and thus helps optimize their operations.
Enables Data-Driven Decision-Making
With supply chain integration, a business can connect different
processes, integrate all data sources, and analyze important data.
This further helps them draw useful insights from data and make
data-driven decisions. Such decisions are often more accurate
and positively impact the business’s bottom line.
Reduced Reliance on Manual Elements
Effective supply chain integration is only possible via smart supply
chain management solutions that offer automation. After all,
businesses cannot integrate and connect so many different
departments or stakeholders using manual elements. These
automated solutions help reduce reliance on manual elements
and increase efficiency and accuracy.
Improved Collaboration & Communication and
Reduced Waste
Supply chain integration is about connecting stakeholders,
improving communication, and promoting collaboration. When
stakeholders can communicate and collaborate better, they can
always remain in sync and reduce waste.
For instance, multiple teams might have their LTL (less-than-full
truckload) shipments scheduled recurringly. This can lead to
multiple LTL shipments on the road, which is wasteful. However,
with supply chain integration, businesses can club those
shipments and send out a single FTL (full truck load) to reduce
waste.
Standardized Information
When businesses opt for an end-to-end integrated supply chain
solution for achieving an integrated supply chain, accessing,
understanding, and managing the information becomes a breeze.
Everything is standardized as such solutions are crafted keeping
in mind all the stakeholders. This way, whether the supplier or the
shipper tries to access the information, they can easily do that
using the same terms or queries.
What Is Integrated Supply Chain
Management?
Integrated supply chain management is an enterprise resource
planning approach wherein businesses can manage and control
all the operations and stakeholders via a single unified interface.
They can also plan, track and manage distribution and logistics
activities via a centralized system. Everything can be managed
from a single dashboard without having to invest in multiple
systems, making management easy.
Therefore, opting for an end-to-end integrated supply chain
management solution is the best way to ensure effective supply
chain integration.
