Nearly every business relies on an efficiently functioning supply chain to get their product from production to their customers. But anyone who works with supply chains knows that each link of these chains can involve distant or independent agencies that operate in very different ways. Supply chain integration seeks to overcome these independent operations between links in the chain to generate a more fluid supply chain.
When supply chain integration is done correctly, there are several benefits. For one, your business will be better equipped to adapt to unexpected market changes and have the flexibility to react to unanticipated circumstances. Integrated supply chains promote more collaboration between different components of your business. This in turn can lead to identifying and eliminating wasteful practices, as well as increasing visibility over changes in the market. These small changes can allow a business to stay on top of changes in demand. Lastly, with more cooperation occurring, a business also encourages more innovation and growth. The more innovation happening within a business, the greater the company’s profit margins will be.
What is Supply Chain Integration and Why is it Important?
Supply chain integration occurs when a company connects as many links in the supply chain together in a manner that encourages those separate links to work more closely together. There are many ways that supply chain integration can be achieved, and they require varying levels of complexity. For example, integration might require more communication between certain links in the chain. It might include a business merger between different companies in order to bring them under a unified management system. In essence, it is a business strategy that seeks to streamline time consuming processes within the supply chain, including the reduction of production time and the time it takes to respond to mishaps, and increased communication and collaboration. When done correctly, supply chain integration reduces costs and waste, and every link of the chain reaps the benefits.
Reduce Supply Chain Risk
Supply chains face new and unforeseen risks every day. In this day and age, some of the biggest threats facing supply chains are related to cyber threats, like hackers, computer viruses, and ransomware. However, increasing globalization, high demand for raw materials, and increasing production costs are also putting supply chains at risk. Supply chain integration helps alleviate some of these risks. For instance, an integrated supply chain may use one software system that implements the same security measures for every link, ensuring that there is no ‘weak-link’ in the chain. Furthermore, an integrated supply chain can cut out many of the middleman costs associated with production. This decreases waste and allows the supply chain to avoid unnecessary costs.
Changes are always happening in the marketplace: demand decreases, prices for materials skyrocket, suppliers go bankrupt. In addition to the routine misfortunes that occur in the global marketplace, issues may arise that have an unprecedented impact on businesses. The Covid-19 pandemic is a perfect illustration of such an event that took such a toll on our global economy and our ability to conduct business as usual with existing supply chains. When a business is unable to adapt to these obstacles that will inevitably happen over time, they have trouble staying afloat. Supply chain integration increases the likelihood that businesses will be equipped to respond to these events because they are operating under a single management who can quickly make decisions and implement changes. Having that level of operation flexibility avoids stalemates between different links in the chain as separate management teams fight over the best way to respond to a crisis.
Reduce Costs and Eliminate Waste
With supply chain integration, each agency shares data with all links in the chain. When this data is collected and reviewed, the supply chain is able to recognize when different links in the chain are engaging in wasteful practices, such as performing repetitive tasks or completing a task in an inefficient manner. When those issues are identified, the supply chain can respond more effectively to cut those wasteful practices and improve the overall sustainability of the supply chain. Cutting out those wasteful practices can not only save time, but in many cases will also reduce costs because the supply chain no longer has to invest in those wasteful operations.
Improve Supplier Relationships
One of the best assets a supply chain can have is efficient communication, particularly with the suppliers that provide raw materials for products. When a supply chain is not integrated, a supplier might be forced to communicate with various links in the chain, may receive mixed messages, or may obtain incorrect or contradictory information. This in turn can disrupt the relationship with the supplier. However, supply chain integration allows the whole chain to speak with one voice, and will never offer confusing or contradictory information. This level of clarity only serves to improve relations with suppliers and promote the success of the supply chain itself.