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FAQs (Frequently Asked Questions) On Supply Chain Integration

FAQs (Frequently Asked Questions) On Supply Chain Integration

Following are some of the frequently asked questions (FAQs) on Supply Chain Integration that we have encountered in our speeches, workshops, seminars, and other forums.  Feel free to ask more questions if your particular question is not answered below.


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Why we are qualified to write this list of FAQs on Supply Chain Integration?

VERY FEW PEOPLE KNOW SUPPLY CHAINS LIKE WE DO - retail, beverages, food, milk, dairy, meat, livestock, explosives, chemicals, cotton, rice, graphite, solar power, natural gas, crude oil, fertilizers, electronics, packaging, glass manufacturing, machine parts, automobiles, industrial goods, mining, etc are just some of the industries where boards and executives have benefited from our proprietary knowledge of the supply chains. 

Click on our project methodology above to see how Supply Chain Integration is an integral step in each and every project that we have undertaken in the last three decades.

Since when no one had heard of supply chain, our co-founder Vivek Sood has been considered one of the most authoritative professionals in the field when it comes to the subject of supply chain analytics in Australia, Asia, North America, South America and Europe.

 He has written four seminal books about restructuring supply chains to gain massive advantage in business. He also regularly delivers keynote speeches at business schools and conferences such as University of Technology Sydney, Supply Chain Asia, Asian Bankers Forum, APEC Business Advisory Council.

He has been quoted in the authoritative business press and over 100 academic papers written by supply chain researchers around the world. Vivek and his team have examined thousands of supply chains during their projects over the last three decades and helped hundreds of executives build safe, cost effective and sustainable supply chains and careers. 

FAQs (Frequently Asked Questions) On Supply Chain Integration

What are the plus points of integrated supply chains?

To keep up with slimming margins, all-time rising competition, and a decreasing amount of differences between brands, more and more businesses are integrating their supply chains. Understanding how and why is the essential part of competing in our globalised marketplace. Integrated supply chains:

  • Allow for organisations to compete better on the cost by eliminating wasted time and inventories, and having fewer middlemen.
  • Enable companies to shorten their product life cycles, by having fewer links in the supply chain from end to end, and tighter coordination between delivery,
  • Storage, and transportation. Allow organisations to respond to rapid changes in the market, and stake claims to new markets for an early advantage.

What is the scale and scope of supply chain integration?

Supply chain integration is a large-scale strategy that brings many links of the chain into a closer working relationship with each other to improve response time, production time and reduce costs and waste—every link in the chain benefits. Integration may be done tightly by the merger with another organisation in the supply chain, or

loosely by sharing information and working more exclusively with certain suppliers and customers. In the last case, the supply chain isn't truly "owned" by one company. Still, the various links operate almost as if one company to increase efficiency and benefit everyone through steady, reliable business.

What are the methods of integrations that are followed in supply chain management?

There are mainly two sorts of integration methods  in the supply chain, and those are :

  • Horzontal integration
  • Vertical integration

What did you mean by horizontal integration?

Horizontal integration comprises any moves related to the same "level" of the chain as the company making them. Integration could include merging with or by acquiring firms that supply similar products, such as a central processing unit (CPU) manufacturer buying another to serve a broader share of the CPU market. This type of relationship could allow the firm to gain many more customers and give them more control over the retail price and supply of CPUs.

What is meant by vertical integration?

Vertical integration refers to any process that includes different levels of the chain. It could involve merging firms to your company, or possibly developing your capabilities for handling the entire supply chain, end to end. For example, if the computer manufacturer mentioned earlier also purchased a mobile product development firm, they would manage more levels of their supply chain. This type of acquisition could provide the firm with greater control over their price, a larger share of profits, and reduce wastage and time spent in production.

Who introduced the integrated supply chains?

The idea of vertical integration came in the 1880s from Andrew Carnegie. With an early interest in steel, Carnegie upscaled his operations by buying iron mines and railroad businesses, effectively lowering his costs and upscaling productivity across the board. This move supported Carnegie to rise into a status that set many long-lasting institutions into place and didn't signal the same monopoly fears as Rockefeller's strategy of horizontal integration by buying up all his competition. Being able to upscale without antitrust suits is one of the critical benefits of vertical integration over horizontal integration, but it requires significantly more investment.

What re the types of the integrated supply chain?

Generally speaking, there are two types of the integrated supply chain, and that is:

  • Loosely-integrated supply chains
  • Tightly-integrated supply chains

Explain the term loosely integrated supply chain with an example?

Procter & Gamble (P&G) is the most prolific consumer products producers in the world. As they scaled up their production capabilities to keep up with the fluctuating demand and prices, they sought a better way to stabilise supply and demand to end promo-driven pricing. P&G formed a partnership with superstore Walmart, becoming an exclusive supplier of some of the products they produced for the retailer and integrating their backend information systems to ensure they matched stock accurately across stores, rather than over-supplying and then discounting as before.

Though none of the firms owned the other, their loose vertical integration of information and supply chains enabled both businesses to increase their sales eightfold.

Explain the term tightly integrated supply chain with an example?

Notable third-party PC  producer Dell is a study in vertical supply chain excellence. They planned to eliminate the things they weren't good at, such as software and retail reselling. They instead narrowed down to there in-depth competencies, enabling fast delivery of superior made-to-order hardware direct to customers with an integrated supply chain. The organisation handled product design and development, and the assembly and delivery of final products.

Dell vertically integrated everything in its supply chain save for parts procurement and reaped the benefits of reduced excess inventory and just-in-time delivery to customers to beat the PC market's growth for a very long time.

What are the challenges faced in a supply chain leading to integration?

The Biggest Challenges in Supply Chain are as follows:

  • Order Changes and Cancellations
  • Workers Unavailable
  • Production Facility Failure
  • Late Delivery of Materials
  • Suppliers’ Conflicting Obligations
  • Adversarial Relationships
  • Transactional Relationships
  • Limited Communications

What is meant by Order Changes and Cancellations?

These things happen at the end of the supply chain and signals reverberations throughout. The retailer is stuck with an excess amount of product; the wholesaler deals with lesser orders and backing up inventory; every other supplier feels these waves. Plus, consumer whim dictates changes, meaning there's little way to predict it, and every case could have different reasoning.

What is meant by Workers Unavailable?

Organisations provide quotes and production orders based on predicted capacity, and when workers are ill or otherwise absent, that can dramatically affect a supplier's capability. This scenario is mainly real in the age of automation, where fewer workers are required, but each is appointed for overseeing the smooth production of many more units.

What is meant by Production Facility Failure?

Like with workers, unexpected hardware or software problems with manufacturing plants can break down a supply chain, if it is operating on just-in-time, Lean production methodologies.

What is meant by Late Delivery of Materials?

This logistical problem can stem from several transportation problems, from as mundane as a traffic collision to as severe as genuine theft, depending on which regions the supply chain serves.

What is meant by Suppliers’ Conflicting Obligations?

 Independent suppliers all have one goal - make as much money as possible by taking as much as orders as possible. In non-integrated chains, this means they have some tolerance for overlap between different consumer's orders. Should one customer decide to increase manufacturing, another suddenly might be out of a production facility because the supplier overcommitted.

What is meant by Adversarial Relationships?

Customers and suppliers might have a  relationship that's more foe than friend. They don't share risks as well as benefits and lose out on potential gains from working more closely together.

What is meant by Transactional Relationships?

Even when not an adversarial, supplier and consumer relationships in non-integrated chains could be "just business," emphasising direct delivery and price with no added value. Every deal is a new negotiation, concentrated on the bottom line, and short-sighted.

What is meant by Limited Communications?

 Non-integrated supply chains may only discuss to firms just one or two links away from them. If they have a purchasing relationship with the association before them, focused on minimising cost, and selling relations with the next link, focused on maximising profit, they can't learn about more significant impending issues or more excellent opportunities further up or down the chain.

How to make a strategy for integration in the supply chain?

When deciding how to position your organisation in the market, knowing the challenges you face is a better first step. From there, utilise this framework to make some best choices on what supply chain strategy you need to make to be competitive.

What are the steps in creating the supply chain strategy for integration?

The necessary steps  in strategy creation are as follows:

  • Define the strategy and the role that supply chain management plays within the organisation.
  • Decide what your firm, and mainly your supply chain, will compete on low cost or differentiation.
  • Divide every supply chain process comes  into "insource" or "outsource."
  • Assess your supply chain architecture.
  • Consider your organisation's current abilities and plans in product and service design.
  • Decide the level of integration you have, the level you want, and the tolerance for each your organisation has.

Explain the step of defining the strategy and the vision of the role that supply chain management plays within the organisation.?

Is it a practice for reducing wastage and speeding up delivery, for strengthening relationships with partners, or for market dominance and also the increasing barriers to entry for more and more competitors? You should consider every part of your strategy and methods for growth in this vision.

Explain the step of deciding what your firm, and ultimately your supply chain, will compete on low cost or differentiation.?

Low-cost supply chains require cutting out intermediaries, limiting transportation needs, and reducing specialisation to save dollars at every stage. Differentiation will require unique relationships with manufacturers who can respond to specific customer requests way down the supply chain promptly.

Explain the step of dividing every supply chain process into "insource" or "outsource."?

Determine the strengths of your firm and upscale all activities that fall under these strengths. If your company creates value in some product that others can't, insource it. Then, find if you can reasonably invest in new vital competencies, or if it will never be profitable or partner up with outsourced suppliers accordingly.

Explain the step of Assessing your supply chain architecture?

How is the chain "built," what are your logistics elements, how are information flows maintained, and what is the timeline for cash flows? Without exclusive management, these different supply chain attributes may have formed a tangled web over time as your organisation grew, born out of convenience or necessity. Each represents a space for improvement as you create your strategy.

Explain the step of Considering your organisation's current abilities and plans in product and service design?

If you want to create more customised, made-to-order experiences, for example, investing in vertical integration may be worth it. If you're going to become the go-to parts supplier for your industry, horizontal integration would be a healthy choice. Make supply chain decisions that cause your organisation to be more like the one it claims and aims to be for customers.

Explain the step of Determining the level of integration?

It is the process of setting the level of integration you have, the level you want, and the tolerance for each your organisation has.

What are the functional levels of integration?

The following are levels of integration:

  • Baseline
  • Functional Integration
  • Internal Integration
  • External Integration

Explain the level of Baseline?

This level of integration has stored information as each department in one company works on issues separately.

Explain the level of Functional Integration?

Information and are activities are throughout all departments in one company, working to increase efficiency.

Explain the level of Internal Integration?

All departments are connected in one network, but each link in the chain is still functionally separate and working off their motivations.

Explain the level of External Integration?

All organisations in the supply chain are sharing information and operating nearly as one to fulfil customer needs, and upscale efficiency and profits all around.

What are the benefits of supply chain integration?

Supply chain integration benefits include:

  • A better understanding of customer and better ability to serve them
  • The most cost-effective and efficient with increased ROI and profit margins
  • Reduced waste material and time
  • Reduced redundancy in supplier function
  • Less risk
  • Enhanced competitiveness
  • Updated with demand
  • Flexible to volatilities in the market
  • Better opportunity for investment when operating in the collective power
  • Get early warnings for problems anywhere in the supply chain due to information sharing.

How to integrate the supply chain?

With a plan in hand and benefits to your business on the books, it's time to look at how to gather everyone else on board. This process includes people in your firm and organisations throughout the supply chain.

Begin by convincing all relevant parties in your organisation that integration will benefit the firm.

Reduce redundancy by carefully filtering and selecting partner suppliers with whom you want to integrate information and logistics flows. Create an end-to-end strategy that makes integration logical, touches only a few hands, and covers the variances in your manufacturing needs with the possibility of increasing as all organisations grow.

With your preferred suppliers selected, present to them that it's in their best interests is to integrate with you and the others using the compelling data on wasted time, storage costs, and more. The bottom line is it's critical for suppliers, manufacturers,  wholesalers, shipping companies, and retailers alike, so be sure to have sales forecasting as well.

In pitching the integration to the partners, find ways to add value to all consumers and suppliers who will be there in the final chain—upscale service levels through tighter commitment with all parties.

Once you have onboarded your partners, it's time to begin integrating activities and data. If you can all use the standard logistics and supply chain management system, it will be ideal, but this relay on the chains desired level of integration.

What are the different operational levels of integration?

The operational levels of integration are specified as follows:

  • Extended Enterprise
  • Virtual Integration
  • Superefficient Company

What is meant by Extended Enterprise?

At this level, information is shared across the chain's organisations, improving relationships, and blurring the boundaries to allow better outcomes for all involved.

What is meant by Virtual Integration?

At this level, all partner organisations use the same information system and software, so you're not only sharing data, but it is also.

What is meant by Superefficient Company?

At the highest level, You and all the other process will share information. You behave like different functional departments at the same company, quickly receiving orders, manufacturing products, and transporting them where they need to be. You might even appoint inter-organisational managers to coordinate specific transition points. And make use of Lean and Agile practices to make this feasible.

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Notes on FAQs

Clearly, any such list of frequently asked questions (FAQs) about supply chain can never be fully exhaustive. Neither is anyone, including us, the final authority and arbitrator on this or any other topic. 

You will have your own opinions on many of these topics, and will have many other questions. 

We throw open the comments section to you for your opinions and questions. We will try to address all of these, and the best ones will attract a reward in the form of one of our books, or publications. 

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