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Supply Chain Integration Strategies
Successful supply chains rely on relevant, up-to-date supply chain integration strategies to stay competitive in today’s market. As companies quickly become global, supply chains will continue to adapt so that companies stay connected to business partners and customers.
Because there are so many kinds of technology being used throughout supply chains, integration is a key element of supply chain management. Effective integration uses software that makes staying connected fast, easy, and secure.
Companies using a transportation management system (TMS) and/or enterprise resource planning (ERP) and looking for adaptability, reliability, and connectivity are ready for supply chain integration. Managing consolidations, cross-docks, shipping, and e-commerce fulfillment is a complex process. Integrations help managers not lose sight of the details, and not only deliver products, but also fulfill their promise of a great customer experience.
Both internal and external supply chain integration helps strengthen the health of a business. Internal supply chain integration encompasses collaboration and coordination of logistics within the inner workings of a company. For example, utilizing new software to onboard internally developed systems quickly is one internal supply chain integration example. This kind of integration helps managers save time while staying current in their business practices.
External supply chain integration involves collaboration and coordination of logistics with supply chain customers and software partners outside of the company.
An example of an external supply chain integration would be executing intricate logistics transactions and managing freight from one integrated platform, helping freight managers work more efficiently. Because supply chain management and transportation platforms may run on decades-old technology or sophisticated cloud technology, it can be tough to find the right integration system to bridge those gaps. But there are solutions. A streamlined, interconnected network increases a company's ability to attract and retain talent as well as reduces errors from navigating multiple platforms, and leaves room for scaling the business and increasing profits.
What is Supply Chain Integration
To define supply chain integration, it’s necessary to understand the elements of supply chain strategy, like where products come from and how a supply chain works. First suppliers need to mine the raw materials. Then the manufacturers form the product. Distributors then take the product and make sure it gets to the wholesaler or retailer. And finally, the retailer gets it to the customer, likely employing help from a logistics service provider.
A supply chain also consists of several other nuanced aspects within it: customer analysis, purchasing, supplier partnering, inventory management, demand, and lead time management, materials management, manufacturing assembly, storage and transport, and order fulfillment. This collection of elements works together to create and deliver a single product.
So what is supply chain integration?
Supply chain integration brings each element of the supply chain into a streamlined working relationship and tightens up the network to work more efficiently.
Supply chain integration strategies may be horizontal or vertical. Horizontal integration entails improvements across the same levels in the supply chain. Vertical integration involves improvements across different levels.
What is an example of supply chain integration?
An example of horizontal integration is simply purchasing competing companies in the same industry, while an example of vertical integration is a wallpaper manufacturer purchasing the mines that harvest minerals used to make paper dyes. Whether a company makes horizontal or vertical moves, both elements of supply chain integration will benefit production costs, helping the business compete in a saturated market.
Types of Supply Chain Integration
Many types of supply chain integration will improve supply chain efficiency. But before looking at them, it's important to understand what effective integration looks like. Businesses focusing on integrations have several elements to keep in mind. Here are six elements of supply chain management to work towards achieving:
- Each part of the network agrees that the customer comes first
- Metrics and reward systems are consistent across networks
- All parts of the network access one database so that everyone sees the same information
- All parts of the network agree on which arm has the final authority on purchasing decisions
- Work is done by the most efficient part of the network
- Operations do not have to be repeated across the network
To reach these goals, businesses need to decide what types of supply chain integrations they need. Luckily external and internal systems integrations can happen between any supply chain software. Here are a few types of integrated supply chain management with examples.
Legacy supply chain systems integrations connect software from different decades and capabilities. Supply chain integrations experts, like Chain.io, use numerous formats and canonical data integrations to connect business partners or systems without predefined API or EDI file formats. Some integrations that save logistics service providers the most time include carbon reporting integrations and customs software integrations. Similarly, a Cargowise integration allows supply chain managers to execute complex logistics maneuvers and freight management directly in their transportation management system (TMS).
Whatever supply chain modernization methods a supply chain company may need, there are integration solutions that will help businesses grow.
Advantages and Disadvantages of Supply Chain Integration
As with any evolution of a system, there are advantages and disadvantages of supply chain integration. Connecting legacy systems to modern platforms can make for complicated supply chain integrations. It’s difficult to convince people to accept change in the first place. Even now, many businesses rely on old practices.
Separate functions like phone calls, e-mails, spreadsheets, order forms, etc. all add up to labor-intensive inefficiencies. It may seem easier to do the familiar inefficient work than to learn something new, even if the new methodologies are faster and more profitable. Even if a company is invested in making improvements, teams probably don’t know how to set up supply chain integrations.
Supply chain integration file types can seem convoluted. And if employees are knowledgeable and willing, they likely don’t have time. So, change must come slowly and manageably. As a result, companies must overcome supply chain integration challenges because the advantages far outweigh the disadvantages.
Advantages of Supply Chain Integrations
The advantages of integration benefit every link in the supply chain. Companies will get a stronger understanding of customers so that they can better serve their needs. Integrations are cost-effective and lead to more profit. Supply chain integrations reduce the waste of time and materials as well as repetitive work functions. Businesses can meet demand more easily by becoming nimbler within changing markets. Better visibility, and therefore easier communication, occur within a collective network. Information sharing allows all links in the chain to see any warning signs for problems.
All these advantages create a more modern, profitable, and competitive company.
Importance of Supply Chain Integration
Challenges within the supply chain highlight the importance of supply chain integration. Supply chain data analysis shows that when companies give pricing quotes and begin production that exceeds or comes up short of expected capacity, it causes disruption, and possible delays, and affects the bottom line.
The same thing is true for facilities that encounter problems with machines or software. Production will, at best, be delayed and, at worst, come to a halt. This means late deliveries, which upsets logistics and creates transportation issues. But transport issues can also be separate, like running into traffic delays or having a collision that damages the product. Multiple arms of the network are affected when this happens.
All arms may have the same goal, so in a non-integrated chain, the blame game can become heated. Additionally, they may have conflicting obligations, which leaves both in a constant state of negotiation. This leads to adversarial relationships, and communications can then become limited or break down completely. Supply chain data may no longer be shared, leading to further production loss.
At the end of the supply chain, there may be problems with order cancellations. There’s little way to predict this, so retailers get stuck with too much product while wholesalers get backed up with inventory. With a better understanding of supply chain issues, companies can employ specific supply chain integration strategies to improve or eliminate these problems, optimize supply chain operations, and stand out in a saturated market.
Establishing Supply Chain Integrations
When a company has a solid understanding of supply chain integrations, and the company and its partners are on board for establishing supply chain integrations, it’s time to merge functions and data internally and/or externally, depending on need. It’s important to choose the right partner with the right supply chain integration software.
Chain.io offers standardized supply chain integrations to help freight forwarders, shippers, and software providers successfully transition and improve their supply chains. A supply chain integration expert will integrate systems faster and better than internal IT teams or other integration platforms and speed up onboarding so companies can utilize their time and resources as efficiently as possible.
The best supply chain integration strategies work toward creating a fully integrated supply chain where all partners maintain reliable purchase orders, shared intelligence, awareness of what competitors are doing, and, of course, increased profits. From that point on, everyone within the supply chain will have a stronger chance of growing together and establishing themselves as the most competitive in their field.