Supply chain integration

2015 is becoming the year of the merger, which means mega-mergers and industry consolidation is being driven across many supply chains. Consolidated supply chains will lead to limited competition and change the way we do business in the future.

Organizations need to manage the integration of business, technology and processes across extended enterprises to be successful. It is no different with supply chain management. Inter-enterprise cooperation and collaboration with suppliers, customers, and business partners is facilitated with supply chain management. This system brings tremendous benefits and competitive advantages to the organizations and major supply chain participants like the suppliers, manufacturers, distributors and customers.

Any supply chain cannot be integrated overnight. The levels of integration evolve and grow deeper overtime. Integrated supply chain improves customer satisfaction and loyalty as the end customers experience improved on-time delivery. There is also a surge in the loyalty among partners, diminished inventory and an increase in flexibility to deal with disruptions.

The primary benefit of integrating a supply chain is the formation of partnerships. Sourcing and customer relationships are transformed into partnerships thereby increasing the trust levels. There is a steady performance and predictable sourcing due to this added trust, paving the way for even former rivals to become partners.

The most important benefits of supply chain system integration are increased on-time delivery and lower inventory requirements. A recent study of supply chain management indicated that companies that moved to an integrated supply chain reported doubled inventory turns, had 50 percent improvements in on-time delivery and experienced a 50 percent increase in sales supported by 35 percent lower inventory. This in turn improved customer service which in turn increased customer loyalty due to better on-time delivery.

An integrated supply chain offers flexibility and a great amount of resilience in facing chaotic circumstances. A company can quickly acclimatize to the varying circumstances without delayed production by having true partners along the supply chain. As an integrated supply chain achieves resilience by increasing flexibility, companies can cross train employees along the supply chain to respond quickly to a shutdown at one point along the chain. The main driver behind any collaboration and integration is the desire to extend the control and co-ordination of operations across the entire supply process, replacing both the market and vertical integration as the means of managing the supply chain solutions.

Stay tuned…