The increasing attraction of supply chain integration

Supply Chain IntegrationTo get the best out of any supply chain it must be fully integrated with the other legacy components of the systems running a business; in particular ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management), and PLM (Product Life-cycle Management). It also involves extending information and participation over the Internet to foster effective collaboration between all trading parties involved in the specific supply chains in question. The collaboration within supply chains has promoted their evolution into supply chain networks. This cross fertilization and the creation of supply chain networks, when added to the linking of all of the supply chains component parts, maximizes the effectiveness and efficiency of those chains, and culminates in full supply chain integration.

What does supply chain integration do?

What supply chain integration does across the board is to change any supply chain to which it is applied, from a simple management tool, into an active, responsive network, populated and driven by the trading partners within the supply chain network. The ultimate aim and benefit of supply chain integration (SCI) is to offer the end user shorter lead times, with reduced inventory costs. The SCI process and framework is used to locate and highlight any problems within the supply chain, which can then be dealt with surgically to achieve further costs savings, thus lowering the final product price.

The core values of supply chain integration

In order to bring the ultimate in consumer satisfaction, (something that supply chain integration has as a core value), it is important to build long-term working relationships with customers. Manufacturers need to listen and understand them. In order to do this, customers need to be regarded from a more holistic viewpoint. This means integrating information from a broad spectrum of sources including supply chains themselves, sales and marketing operations, customer service and field service systems, information contained within internal databases, and data obtained from structured and unstructured interaction with customers.

Supply chain integration goes far beyond simple tactical order completion. It looks to gain a better understanding of what the customer desires in terms of products and services. This can then be used by supply chain originators to manage their product and service offerings, and increase profits.

Case study summary – Proctor & Gambol

One particular case study on the benefits of supply chain integration focused on Procter & Gamble. Some 10 years ago, as Procter and Gamble were rapidly expanding their product and service offerings, they focused on in-store sales and price promotion. The result was that this played havoc with product demand, creating short term spikes in demand. This caused Procter & Gamble to spend millions of dollars, creating huge manufacturing plants, gigantic warehouses and massive inventories with convoluted logistic networks, to cope with wildly fluctuating demand.

Over the next months and years Procter and Gamble introduced supply chain integration, focusing internally and externally from marketing through to production; taking into account inventories and logistics as they changed in relation to fluctuating business requirements. Part of this process included the oft-studied partnership with Walmart. This partnership meant that eventually Procter and Gamble could virtually do away with their in-store price promotions, and were able to streamline their logistics and continuous replenishment operations, which not only led to reduced fluctuations in demand, but bought down overall costs as well.

The part IT has to play

As demand for supply chain integration continues to grow, the ongoing improvements and innovations that take place in the world of IT facilitate the integration process. The networking of information and software, and the development of “computing in the cloud” in particular, have been key drivers.

Overcoming the “not invented here” syndrome

One of the problems that companies face when first attempting to bring about supply chain integration, is the “not invented here syndrome” that many businesses foster. For full effectiveness supply chain integration requires not just that all trading partners must actively participate, but that they should do so on a common platform. To achieve this, more and more supply chains are now turning to hosted solutions whereby all members within the supply chain contribute towards system costs. However they only ever pay for what they actually use themselves. Not only is this a fair solution, but it’s one that also helps to reduce the likelihood of overspending during the setting up process.

Another advantage of the hosted solution is that it helps to reduce any potential friction between supply chain partners. It also helps to promote transparency within each transaction, which in turn breeds trust between partners.

The future of supply chain integration

As the growing number of companies deciding to invest in supply chain integration expands, the market for hosted solutions using SaaS (Software as a Service) continues to grow. Businesses are taking advantage of the fact that in addition to providing a common IT base for all supply chain training partners, these hosted solutions are already fully formulated, although they can still be tweaked to satisfy the specific demands and requirements of individual supply chain networks.

What are the potential benefits that supply chain integration could bring to your company’s operation and would these benefits outweigh the cost? Have your say at feedback section below.

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