Internal Integration In Supply Chain

With supply chains worldwide facing unprecedented disruptions within recent years, industry leaders have increasingly turned to supply chain integration, advanced technologies, and innovative models to remain competitive.

Supply chain integration can best be described as a process that creates cohesion and promotes connectivity at all stages of the entire value chain — from procurement to production and logistics. Often touted as providing end-to-end visibility, supply chain integration platforms eliminate the silos that often exist within a company. Supply chain integration software can ensure that disparate functions are pulled together in a way that promotes collaboration around common company goals. Individuals in various departments will be able to access centralized cross-operational data that guide better decision-making about various aspects of the supply chain.

The two main types of supply chain integration — internal integration and external integration — are central to a company’s ability to take advantage of more opportunities to minimize waste and inefficiencies, maximize profitability, and enhance customer service.

It is important to understand how the 4 elements of supply chain integration can help accelerate a company’s business goals and performance. In most cases, any supply chain integration project will fall into the following areas.

Integration. During the strategic planning stage, companies will implement internal supply chain integrations as a critical component of information sharing, communications, data analysis, and storage. Teams also may focus on enhancing visibility throughout the supply chain with internal and external supply chain solutions that give them and their partners an unobstructed view of supply chain activities — allowing them to troubleshoot challenges in real-time. As a result, users of internal integration in supply chain can gain data insights that allow them to be more effective in addressing potential disruptions with production, timelines, and delivery schedules.

Operations. Functional integration in supply chain provides companies with a real-time view of inventory levels and production schedules. As a result, internal teams have the insights they need to efficiently run operations and hit their KPIs. With supply chain integration software, decision-makers can more readily identify disruptive events and challenges. It allows them to be nimble in facilitating changes that ensure on-time fulfillment.

Purchasing. Supply chain integration software can ensure that a team is making better decisions about purchasing quality products at the most competitive prices from their supply chain suppliers. With demand forecasting capabilities built into supply chain solutions, users also will be able to purchase materials and products in quantities that more accurately match demand cycles.

Distribution. Supply chain integration can give companies the critical insights needed to streamline and optimize distribution management, including warehousing, inventory management, packing, shipping, and delivery.

External Integration in Supply Chain

While internal integration in supply chain commonly refers to the activities among departments or functions within a company — a key strategy for eliminating siloes, external integration in supply chain management addresses communication opportunities outside of the company.

So, what is external integration? External integration examples include activities that involve collaboration with suppliers, vendors, warehouse operators, customers, and other members of the supply chain.

The benefits of external integration in supply chain can result from various companies in the same supply chain working together to achieve similar goals as they seek to enhance the quality of products, maximize efficiency, and improve customer satisfaction.

Through lean manufacturing, companies can collectively realize numerous advantages, including reduced set-up times, shortened lead times to market, a higher rate of on-time delivery, and improved inventory management. As a result, all companies involved in the supply chain can experience an increase in revenue and overall productivity.

In most modern cases, external supply chain integration is achieved with software solutions specifically designed to address the challenges that obscure visibility. For example, supply chain integrations can deliver real-time data from the supplier’s systems to their customer's systems.

As a result, the customer will have real-time insights about the current status of orders, products available in the supplier’s inventory, and other relevant data.

Internal Integration in Supply Chain Management

With optimal internal integration in supply chain management, all departments within the company no longer are working in siloes. Through internal integration in organization models, team members will be able to communicate more efficiently, effortlessly sharing their needs and identifying opportunities to collaborate.

Internal integration examples may consist of information shared among varied departments, including marketing, sales, procurement, manufacturing, and distribution. Through real-time visibility into shared data, decision-makers in these departments can more effectively collaborate in real-time to streamline processes, maximize efficiencies, cut costs and waste, and work toward the company’s objectives.

Real-time insights gained through internal integration in supply chain also can help departments manage inventory, adjusting as needed based on the real-time insights they’re gaining about supply and demand.

With organizational integration in supply chain, companies can address challenges that can impede transparency into important data. Internal supply chain components can help them leverage opportunities to integrate supply activities, including procurement, manufacturing, and logistics, with demand activities, such as sales and production.

Beyond the Horizon, a project conducted by Broad College of Business at Michigan State University and funded by APICS, gathered supply chain innovation insights from more than 100 executives from more than 50 companies around the world.

The research found that many business leaders were focused on improving the balance between supply and demand sides of their companies, which can have different objectives and goals. For instance, the supply side may be more focused on efficiencies in managing resources — including plant capacity, inventory, and purchasing costs. The demand side of a company likely will be more concerned about customer satisfaction, ensuring that they are meeting product demands and ensuring a high level of service.

However, without a balance between the two, companies may be faced with excessive inventory levels or shortages of preferred products.

With an internal integration in supply chain solution, companies can facilitate communication and collaboration across different departments and functions to enhance forecasting and supply management. Several companies cited in the report shared their efforts to improve internal processes, including Sales and Operations Planning (S&OP), to ensure that they were balancing supply and demand.

Internal Integration vs. External Integration

When considering the benefits of external integration, companies may need to first gain a deeper understanding of internal integration vs external integration challenges and benefits.

What is internal integration in supply chain? The importance of internal integration can be tied to a company’s ability to eliminate silos in different functions and departments. Without supply chain integration, teams within an organization will lack the insights they need to avoid duplicating efforts. As with many traditional supply chain operations, marketing and sales teams, operations, distribution, and other departments will operate without knowledge of each other’s plans and strategies.

Supply chain integration platforms can give users real-time insights based on data from other departments, allowing them to gain a significant increase in cross-operational visibility. This can lead to the ability to streamline processes, improve day-to-day functions and collaboration, and minimize the manual transfer of data.

So, what is external integration in supply chain management? With external supply chain integration, companies focus on sharing data and insights with external partners — including vendors, suppliers, warehouse managers, distribution centers, and transportation systems.

Through enhanced collaboration with external providers through connected systems, companies can improve outcomes and performance in various areas, including inventory management. As an example, companies can minimize external supply chain risks and improve real-time insights about inbound and outbound logistics by integrating their transportation management system (TMS) with a warehouse management system onto a single platform.

These enhanced insights can be critical as companies engage in an increasingly complex logistics network of outsourcing and offshoring solutions as well as customer expectations for faster lead times. Supply chain integration provides the opportunity to streamline operations, cut costs, and improve customer satisfaction.

Importance of Supply Chain Integration

Companies that can overcome the barriers to internal integration in supply chain, including employee resistance to change, can realize a significant number of benefits.

The benefits of supply chain integrations, both internal and external, start with the significant gains with transparency into important data from varied departments, including marketing and sales, procurement, manufacturing, and distribution.

The importance of supply chain integration is often seen in a company's ability to collaborate in real time. For example, external supply chain integration solutions like transportation management system (TMS) integrations can enhance collaborations with 3PLs, freight forwarders, and other partners to ensure that the teams can more readily optimize routes, find ways to reduce freight expenses, ensure compliance, and negotiate rates.

With the real-time insights gained in supply chain integration software platforms, users also can quickly make informed decisions on how to execute other activities in the supply chain, including managing inventory, streamlining processes, and better delivering on customer expectations. Supply chain integration solutions are essential for companies that want enhanced visibility into all tiers of the supply chain — and the ability to create flexible and nimble supply chains based on real-time, accurate data analysis.

When starting supply chain integration projects, selecting an integrations expert like Chain.io saves teams time, resources, and money on all of their integration needs. The average integration project takes 2.8 years to complete, but with Chain.io's canonical data model and pre-built adapters, that time can be slashed to just a few months or even weeks.