Integrated Supply Chain Management
Introduction
Each and every business tries to find ways to improve its business processes so that the overall efficiency and productivity of the business attribute to maximization of profit. Supply chain is a very integrated part of any business process and improvement in supply chain absolutely helps achieve the above objective. Manufacturing excellence was the primary goal of many companies till 1980s. However, with globalization and outsourcing the importance of supply chain has increased than that of manufacturing for most of the businesses. Standard supply chain practice has helped businesses benefit heavily in last 20 years. However, in the new century with huge improvement in information technology and data analytics techniques, better supply chain models have emerged. Lean supply chain and integrated supply chain concepts are fast becoming very popular. This essay will discuss about integrated supply chain and its benefits, further highlighting how supply chain logistics strategies helped achieve economic value in the United States.
In the very early days of commerce, sellers used to bring their products in a centralized place called market and buyers also used to come to market in search of things they need. Prices were negotiated in person and delivery was also conducted in person. This concept of market was rich in product information but the information was unknown to the buyers till they actually visited the market (Westbrook, 2012). Over time with the advent of communication devices and delivery, market became decentralized. The products and the buyers now could be miles apart but still the buying process can take place. With the advancement in transportation systems like train, airplane and automobile, products started moving from one place to another at affordable rates. This created a decentralized and disconnected product market. This was the first introduction of supply chain into the business.
With the advent of information technology, product information started reaching more and more prospective buyers. However, from the very beginning of information technology days there was always a tradeoff between richness of information and reach of information (Westbrook, 2012). In the past this was big challenge and often companies compromised information quality for richness. With the advent of internet based technology, compromise between richness of information and reach seems no longer a problem. Information has now become the glue to hold the business together. Business information flow has become as important as the actual product flow along the supply chain. Information and product should flow along the supply chain in a synchronized manner helping each other become more effective in its objective of reaching the buyer in the correct shape, form and time, the way he wants it.
Integrated Supply Chain
In case of small and one dimensional supply chain it is easy to manage information and product flow but in recent years the supply chains have become very complex. Complex network supply chains have become the norm for the companies of today. Companies operate in different markets selling varied products making the supply chain process more complex than ever. Integrated supply chain integrates the various islands in a supply chain. It integrates the vendors, suppliers, subcontractors, warehouses, production plants and buyers by creating a collaborative supply chain framework (Stevens, 2007). The main thing that binds those entities is entity to entity information exchange. Minimizing the human contact in the information flow and making it automatic is an integral part of Integrated Supply Chain. Movement of data in real time across business entities helps small entities do business seamlessly with the bigger companies. Solutions like value added network help the integration process through safe and online data exchange between supply chain entities. E-Commerce is another thing to have revolutionized the concept of integrated supply chain (Stevens, 2007). Purchasing sits in the heart of the whole supply chain process and E-Commerce has eased the purchasing process by integrating all other functions with purchasing function. Purchasing process and approval used to take days before the advent of e-commerce but now it is done within minutes thereby improving the overall supply chain efficiency.
Benefits of Integrated Supply Chain
The first and foremost benefit of integrated supply chain is the reduction in inventories. Earlier supply chains used to source, hold, sell and supply products. In an integrated supply chain, products move in sell, source and supply mode (Westbrook, 2012). This helps reduce the inventory. From the hold and sell mode integrated supply chain helps move the supply chain towards the “just in time” inventory management.
Better information helps in the improvement of the customer service. Information helps improve sales accuracy, replenishment and shipping decisions (Stevens, 2007). Emerging information technology tools help in allowing the business partners track orders collaboratively through the fulfillment process, plan, maximize process efficiency and provide better service to the delivery point.
Integrated supply chain helps in the automation of the supply chain. This reduces enterprise wide amount of labor and manual processes (Westbrook, 2012). This also reduces the chances of manual error and incorrect data entry. Incorrect data in a supply chain process can create confusion and contradictions leading to customer dissatisfaction and dispute between business partners. Integrated supply chain with high level of automation reduces the chances of that kind of error. Information automation also helps reduce cycle time greatly.
Logistics Improvements and United States
Supply Chain logistics strategies not only benefit the companies implementing that but also the stakeholders who get affected by the process indirectly or directly. For example, some time back UPS and FEDEX started providing real time tracking and inventory status of orders. This not only benefitted UPS and FEDEX gain more customers but also benefitted the companies who were selling products using the logistics system of FEDEX and UPS. They benefitted as they got clear visibility of the status of the product delivery and inventory. Buyers also benefitted as they got the visibility of the product delivery status.
Another supply chain strategy that was implemented by most of the retail giants and the supermarkets in USA were a collaborative inventory and sales management (Stevens, 2007). For example, P&G launched a partnership with Walmart. P&G was mainly responsible for manufacturing, marketing and inventory and Walmart was responsible for logistics, sales and price promotions. This way both used the core competencies of the other and the overall efficiency of the supply chain improved. This improved the profitability of both Walmart and P&G. Additionally, some of the logistics benefits were also passed on to the customers. This way this supply chain logistics strategy created economic value for all.
Conclusion
Integrated supply chain is the future for all the companies. Better supply chain logistics strategies with the help of integrated supply chain practices will provide superior benefit to the companies than they are getting today. Companies will surely realize that participating in a networked supply chain with integrated supply chain practice will provide huge leverage against its competitors. Supply chain integration surely seems as the end game for future.
References
Westbrook, Thomas J (2012). Integrating the Supply Chain. The Wood Industry Network. Retrieved on 10th January 2014 from <http://www.wwwood.net/pdf/Integrating%20the%20Supply%20Chain.pdf>
Stevens, Graham C. (2007). Integrating the Supply Chain. Emerald Backfiles. Retrieved on 10th January 2014 from < http://cc.sjtu.edu.cn/G2S/eWebEditor/uploadfile/20130422113932110.pdf>
