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Supply Chain Integration - a strategic alliance empowers partners
 

 

Supply chain's strategic importance in today's global business can't be over emphasized. From supplier's supplier to customer's customer, it's all about a chain spreading over continents, cutting across the barrier of nationhood , language and currency.
The ultimate objective of satisfying the customer and retaining him over a period of time has given rise to an agile and lean supply chain.
Integration of Supply chain in the back drop of it is basically a strategic alignment of partners such that the requirement of

providing the right material , at the right price, of right quality and measure to the ultimate customer is fully met.
The seamless integration should also ensure , ideally, no wastage or unnecessary hold up of material across the chain.
 

Compulsions for integrating supply chain:
Organizations are seeing many compelling factors that are responsible for emergence of integration of supply chain. Some such factors are :
 
  • Competition is becoming fiercer by the day. To remain competitive is a necessity than a desirability today

  • Customers are demanding better quality at  reasonable price

  • There is qualitative change in the supply chain now. The partners too are demanding and need customized chains

  • Free trade is growing ,compelling organizations to have international outlook

  • New concepts are emerging and ruling. Lean manufacturing, just-in-time, vendor managed inventory (VMI), mass customization, flexible manufacturing, virtual integrations are order of the day

  • Product focus is giving way to process focus , enabling firms to improve operations

  • Communication is improving by the day. Electronic data interchange, electronic fund transfer, e-commerce etc are faster , reliable  and strategic

  • Tendency to outsource peripheral activities and concentrate on core activities is now the accepted norm worldwide

  • Mergers, acquisitions and all kinds of business alliances are changing the economies of scale

  • Modes of transport too are changing   

 

Meaning of Supply Chain integration :
In a typical, extensive supply chain there could be many sub-supply chains extending over a number of independent organizations to produce the final result, that is of reaching out to the customer as the customer wants.

If each organization involved in the chain looks only at its operations , ignoring others' the boundaries do exist resulting in inefficient movement of materials and incurring of higher costs.
External integration removes such boundaries resulting in smooth operations

 
between them.

In general, there are three levels of integration. One that is a recognizable separate set of activities within  an organization. Second , an integration within the organization and the third one an external integration, with an outside organization.

How to foster integration ?

Cooperation--Strategic alliances--Vertical Integration


Cooperation :
While integration within an organization can be understood considering that an organization is under one roof , it is integration with outside organization that needs careful planning and handling. Basically, it amounts to resolving conflict of interest between the organizations. Based on cooperation and understanding of mutual interest the integration takes place. Such integration may affect the way the partners work.

For example, electronic data interchange, change in packaging design of material, lists of preferred suppliers etc. However, better integration takes place if it is informal and non binding.

 

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