In an increasingly complex and dynamic business environment, it is critical that organizations work together to gain competitive advantage and provide as much value as possible for customers. Supply chain integration plays a central role in this.
Supply chain integration
The key to success in a constantly changing world
What is supply chain integration?
Supply chain integration is an intensive form of collaboration within a business chain. We speak of supply chain integration when successive links within the supply chain seek synergy and the achievement of joint benefits through integral cooperation. Not so much the individual parts, but rather the chain as a whole is the focus.
Supply chain integration is also called supply chain management or chain cooperation. The terms are interchangeable, but supply chain integration finally goes a step further than simple cooperation. Supply chain integration takes place at both operational, tactical and strategic levels and on various processes, for example: purchasing, order processing, delivery, planning, invoicing, production and inventory management.
What is the goal of supply chain integration?
The goal of supply chain integration is to create as much added value as possible for all links within the chain, including the end customer. The latter is crucial because it increases the competitive position of all chain partners.
Added value for companies within the chain can be found in:
- Improve competitiveness.
- Respond faster to changes (e.g., of customer requirements).
- Increase continuity in the production process.
- Reduce delivery times.
- Cost savings (e.g. of FTEs, production costs).
- Reducing risks.
- Higher reliability (e.g., of deliveries).
- Higher predictability (e.g., of future orders).
- Lower inventory.
- Shorter inventory turnover.
- Lower error rate (e.g., on orders, or invoices).
The above results can then lead to the following added value for the (end) customer:
- Better quality.
- Shorter delivery times.
- More reliable delivery times.
- Lower price.
- Customized products.
- Greater variety of products.
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Strongest example of supply chain integration: Pie-growing
The strongest example of supply chain integration is pie-growing, where the pie (pie) symbolizes the market. The philosophy of pie-growing is that the supply chain partners are not competing among themselves for a share of the pie, but together are able to grow the market.
Pie-growing is diametrically opposed to pie-sharing, where the basic principle is that companies within the chain share the pie with each other, competing with each other to get the largest possible share of the pie at the expense of the other companies in the chain.
Pie-growing requires non-traditional thinking. Instead of assuming traditional customer-supplier relationships with competing interests, Pie-growing is about trust, transparency, synergy and long-term and close partnerships.
Pie-growing is a beautiful aspiration, a dot on the horizon, you might say. For many chains, the reality is a lot more unruly, sees Jacques Varkevisser, senior EDI consultant at OMS International in practice:
“In many chains, the traditional customer-supplier relationship calls the shots, with the chain partners primarily serving their own interests. There is also cooperation there, but on a different level”.
Nevertheless, much can be gained on this level too, when supply chain partners share information with each other and make optimal use of it:
Supply chain integration begins with sharing of information
Supply chain collaboration begins with mutual sharing of information. Information sharing allows progress to be tracked, any bottlenecks to be identified and timely responses to changes or problems. It also enables better logistics planning.
A crucial tool used in communication is EDI (Electronic Data Interchange), which enables the exchange of relevant information between chain partners on a large scale. EDI provides a standardized and streamlined data exchange that allows data to be exchanged quickly and efficiently between chain partners. This leads to a more efficient flow of information and better coordination of activities in the chain.
Using EDI, partners in the value chain can work closely together, share data and implement innovations quickly, which can lead to joint market growth and increased competitiveness.
Supply chain integration in various sectors
Supply chain integration offers added value in various sectors, some examples include:
In the manufacturing industry, supply chain integration, supported by EDI, leads to better alignment of supply and demand, more efficient production planning, and increased customer satisfaction. By working closely with suppliers and distributors, organizations can achieve just-in-time deliveries, reduce inventory levels, and ensure product availability, thanks in part to real-time data exchange via EDI.
In our case story from PACCAR Parts, demand planning manager Tim Molhoek explains the importance of supply chain integration and EDI:
“The ultimate goal of our end customer is to maximize truck uptime. This means that the trucks must run as long as possible without unplanned strandings. In fact, trucks are scheduled with very little room for margin. With a few days of downtime, our customer is already laying on it. So if our parts availability is high, the customer is satisfied because then he can get the maximum potential out of his truck. To achieve this goal, we pursue a high level of supply chain integration. To keep the availability of parts as high as possible, it is necessary for the entire chain to cooperate and actively share information. Here EDI is a crucial means of strengthening integration with chain partners.”
Jacques Varkevisser of OMS International gives an example of Just-In-Time deliveries in the automotive industry using EDI:
“A car manufacturer depends on several suppliers who supply parts needed for the product process. Take wheels as an example: on the very limited piece of factory land they have available for assembling wheels, they don’t have room to stock 4800 wheels for 1200 vehicles they make per day. Therefore, wheels are delivered by suppliers every hour of the day according to agreed specifications.”
In retail, supply chain integration using EDI provides better inventory control, reduces out-of-stock situations and improves delivery reliability. Electronic data exchange allows retailers to respond quickly to changes in demand and increase customer satisfaction through a more efficient supply chain.
Supply chain integration using EDI is also valuable in the service sector. For example, in the logistics sector, coordinating transportation and warehousing services between different partners can provide more efficient logistics processes and cost savings. Logistics service providers can also use EDI, to streamline the exchange of freight information, scheduling and invoicing.
In our case story from Vercauteren Transport, Bart Vercauteren talks about the benefits of e-invoicing for he
What can supply chain integration do for your organization?
Would you like to discover how supply chain integration, supported by EDI, can help your company succeed in a rapidly changing business world?
Then contact OMS International. With more than 30 years of experience, we are happy to think with you in providing a solution that is just right for you.