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Importance Of Supply Chain Integration
In recent years, the importance of supply chain integration has come into clear focus. The COVID-19 global pandemic revealed vulnerabilities in the supply chains of businesses around the world as they faced a series of disruptions, including heightened consumer demand, factory closings, trade restrictions, inflation, and rising fuel and freight rates.
As businesses regrouped among the stiffer competition and increasingly demanding customers, those who invested in supply chain integration strategies and solutions emerged as the most resilient.
What is supply chain integration?
At its core, supply chain integration addresses many of the challenges in a supply chain, which consists of a network of companies or individuals that are involved in the stages of the production of a product during the manufacturing process and then the phases it undergoes before it is delivered to the end user. These steps generally are the sourcing and transporting of raw materials to the business client and, eventually, the distribution of the final product to customers.
As a result, to define supply chain integration, best-practices to integration must be followed, and there must be a reference to ways to optimize all aspects of collaboration and engagement among the suppliers, business decision-makers, freight forwarders, 3PLs, 4PLs, and other transportation experts in the supply chain.
In most cases, the 4 stages of supply chain integration, which can accelerate business goals and improve efficiency, performance, quality, and customer satisfaction, include the following, along with their respective supply chain integration examples.
Integration. Implemented at the strategic planning stage, integration is a critical component of effective communications, data analysis, information sharing, and storage. With the right innovative supply chain integration software, teams and their partners can gain a cohesive view of information related to their supply chain activities — from projected delays and material shortages to inventory levels. It can provide accurate data insights that guide more effective decision-making among a company's leaders.
Operations. With supply chain integration technology that provides a real-time view of inventory levels and production schedules, teams are better prepared to run operations in a way that aligns with their company’s goals and objectives. Supply chain integration software represents the opportunity to better predict disruptions and challenges, giving decision-makers insights to facilitate changes that can ensure timely fulfillment.
Purchasing. Another key stage of supply chain integration is purchasing. Supply chain integration software can ensure that a team can secure quality products at the most competitive pricing when sourcing for their supply chain. Demand forecasting capabilities also ensure that the company can secure key materials and products in adequate quantities by keeping track of suppliers and demand cycles.
Distribution. Yet another of the 4 elements of supply chain integration, the transportation of goods can be a critical component of managing costs. With supply chain integration software, companies can more quickly identify ways to streamline and optimize the transportation of goods to reduce operating costs and enhance customer service.
Supply Chain Integration: Challenges And Solutions
What is the goal of integrated supply chain management? When navigating the advantages and disadvantages of supply chain integration, many companies have decided that the benefits outweigh many of the barriers of supply chain integration.
Network integration in supply chain management is helping companies become more competitive by helping them realize significant benefits in reducing costs, enhancing business performance, and improving customer satisfaction.
By providing a platform in which teams and partners can collaborate on more accurate, real-time data about the supply chain, a company can ensure that they have the tools to improve response and production timelines. Effective supply chain integration tools also give decision-makers the insights needed to minimize waste and reduce costs at all 4 stages of the supply chain.
As critical as supply chain integration tools are to a company’s performance, implementation can have its challenges. As business leaders consider supply chain integration strategies and solutions, they should be prepared to address supply chain integration challenges and solutions at various levels.
Lack of information sharing: If departments have not been in the business of information sharing, there may be resistance to a change in policy. The organizational structure of the company needs to be addressed when undergoing significant changes in processes and employee behaviors. Change management may be key in promoting transparency and the elimination of siloes. The advantages of supply chain integration in company profitability and other KPIs also should be clearly explained during this process.
Lack of information technology skills: Companies may be hesitant to adopt new technology if it is unfamiliar to them or if they don’t have an internal team with the know-how to transition to automated supply chains. With the right software partners, companies can gain access to training and solutions that can help them overcome these barriers.
Financial: Inevitably, business leaders may be resistant to switching to a modernized supply chain because of the upfront costs associated with the transition. In this case, the company should analyze the long-term benefits of supply chain integration, including the financial gains made by switching to a more efficient and streamlined supply chain.
Types of Supply Chain Integration
In general, those in the supply chain industry will refer to two types of supply chain integration — internal supply chain integration and external supply chain integration.
Companies often want to address both internal and external challenges within their supply chains. With a functional integration in supply chain, solutions can eliminate the siloes among departments that can impede transparency into important data.
With an internal integration in supply chain management, leads in varied departments, such as marketing and sales, procurement, manufacturing, and distribution can better collaborate in real-time to streamline processes, gain efficiencies, cut costs, and achieve the company’s objectives.
It improves their ability to integrate supply activities, including procurement, manufacturing, and logistics, with demand activities, including sales and production. Companies also can gain insights to more quickly manage inventory, adjusting as needed based on real-time insights about supply and demand.
Supply solutions like TMS integrations enhance collaborations with external providers. Through external-focused solutions, partners can optimize routes, streamline vehicle load optimization, reduce freight expenses, and allows for enhanced freight negotiation.
Integrated Supply Chain
For years, the importance of supply chain integration solutions has been demonstrated by companies that have been able to gain end-to-end visibility and enhance supply chain efficiency throughout their operations.
Through an innovative integrated supply chain, companies have been able to drastically reduce costs in some areas to secure their place among the top competitors in their industries.
As a supply chain management project example, Intel, an early adopter of supply chain modernization, was able to cut costs on its low-cost "Atom" chip several years ago. Previously, the manufacturer of computer chips was paying supply chain costs of about $5.50 per chip for units that were selling for $100. However, the company wouldn't realize much profitability through that model for a chip that would cost customers about $20.
After analyzing options to cut costs — including minimizing packaging, Intel realized that it would need to cut supply chain costs by reducing levels of inventory. The company found its solution by introducing make-to-order to eliminate supply chain inefficiencies. As a result, it was able to leverage supply chain software to drive order cycle time for the Atom chip from nine weeks to two weeks — a process that reduced the need for large inventory levels.
Future Of Supply Chain Integration
The promising future of supply chain integration is fueled by increasing demand for supply chain integration software as companies navigate the continuing challenges of supply chain integration.
As McKinsey has reported, uture supply chains will need to be increasingly agile dynamic, with the ability to predict, prepare, and respond to rapidly evolving customer demands as well as changing products and mix of channels. The report points to various events, including the COVID-19 pandemic crisis, economic woes, and the Ukraine-Russia conflict, contributing to the extensive vulnerabilities in global supply chains.
With supply chain visibility solutions, including APIs and supply chain integration software offered by companies like Chain.io, providing answers, chief supply chain officers are now in a position to future-proof their supply chains through prioritized strategies and investments, McKinsey noted.
According to McKinsey, the priorities should include the following:
Building resilience. Through supply chain solutions and integrations, companies will be able to better anticipate and navigate challenges like those experienced during the pandemic-related disruptions. According to the McKinsey Global Institute, companies should not consider similar events as once-in-a-lifetime occurrences. On average, a company will experience one- to two-month-long disruptions every 3.7 years, according to research.
Increasing supply chain agility. Since customer brand loyalty is on the decline as a result of a hike in online browsing and shopping, companies must be able to respond. Many customers reported that they switched brands because of a lack of product availability. Optimized supply chain solutions ensure that companies keep products flowing to customers.
Achieving supply chain sustainability. Consumers feel strongly about sustainability. By being able to readily identify suppliers and their sustainability credentials and values through supply chain solutions, companies are better able to achieve their sustainability goals.