What is Supply Chain Integration

What is supply chain integration? As businesses face stiffer competition amid a growing number of global competitors and increasingly demanding customers, supply chain integration strategies have become integral to a company’s ability to succeed.

When seeking to understand supply chain integrations, it’s important to first grasp a supply chain definition. A supply chain consists of a network of individuals and companies that are involved in various steps of creating a product as part of the manufacturing process and then ensuring that it is delivered to the end user. This can include those responsible for the raw materials to those involved in transporting components and the final product.

Supply chain integration refers to the continuous process of optimizing engagement among the Original Equipment Manufacturers (OEMs), suppliers, logistics service providers or carriers, and customers to ensure that all have insights into the various activities at all levels of the supply and demand chain. Through improved supply chain management, companies can streamline processes, minimize costs and risks, and boost their competitive edge in the market.

Many supply chain examples point to clear benefits of integrated supply chains, including enabling companies to minimize wasted materials and time, shorten product life cycles, better coordinate warehousing and transportation, and get products to market faster. By increasing communication and efficiencies at each stage of the supply chain through better data and processes, a company can realize significant overall gains.

Most companies will have 4 functions of their supply chain, depending upon the industry they operate in as well as their business objectives. In general, this includes products, facilities, transportation, and routes.

Another element of supply chains includes through models. This includes continuous flow, a traditional model that emphasizes stability with requirements for the manufacturers and the buyers. Typically, continuous flow is used by businesses that produce a uniform set of products that have a steady customer demand.

With an increased demand for digital solutions, many companies use supply chain integrations to keep up with customer demand in real-time. Companies can receive real-time updates from a fully integrated system that filters data directly into their systems, like integrating visibility data directly into a freight forwarders transportation management system (TMS).

Supply Chain Models

The build-to-order supply chain model, which requires close attention to inventory levels and delivery methods, reflects the production of an item after the customer demands it. The continuous replenishment model works by team members notifying suppliers daily of sales and warehouse shipments to ensure that inventory is being replenished based on demand.

Supply chain integration: Challenges and solutions

Supply chain integrations can be difficult for logistics service providers, shippers, and even software providers to establish, as many require complex connections to legacy systems. These systems don't often speak the same language, so partnering with a supply chain integrations specialist like Chain.io helps companies establish integrations faster and with more accuracy than if they were to tackle the project themselves.

Furthermore, companies can overcome the barrier to supply chain integration by challenging themselves to eliminate silos among departments and suppliers, defining clear KPIs and business goals, seeking advanced technology that optimizes and streamlines supply chain integration, and utilizing advanced analytics to get real-time insights to collaborate more effectively and inform decisions.

Once a plan is in place to start a supply chain integration project, companies can expect to see increases in efficiency and productivity on their teams. Having the latest data available directly in their systems enables supply chain professionals to reduce the amount of manual data entry and research and focus on serving customers and moving freight.

Types of Supply Chain Integration

When companies are seeking to optimize their supply chain, they have a number of integrations to explore, like vertical and horizontal integrations, relationship integrations, technology integrations, and measurement integrations. Establishing functional integration in supply chain systems can help businesses identify areas for improvement and assess how they can gain efficiencies and enhance productivity.

Vertical and Horizontal Supply Chain Integration

Two types of supply chain integration are recognized throughout various industries — horizontal integration and vertical integration. With horizontal integration, companies collaborate with similar organizations in their area of the logistics and supply chain market.

As part of vertical integration, companies work with other organizations above and below where they are in the supply chain. This type of supply chain integration also typically encompasses being able to manage aspects of production internally. Internal integration in supply chain management can be essential in managing costs, meeting company objectives, and identifying new opportunities.

Gaining Resiliency Through Supply Chain Integration

Companies can identify specific functions to ensure that are building a resilient and nimble supply chain. These can include the following areas:

Customer integration: Companies can enhance customer engagement and customer loyalty by keeping their clients at the forefront of their objectives. For example, in addition to ensuring that products are delivered to the customer’s expectations, a freight forwarder can also deploy shipment milestones and ASNs (advance shipment notifications) automatically to customers system or established web portals so their customers have better visibility into the status of their shipments.

Transportation integration: Whether a shipment is being transported on by ship, air, road, or rail, companies can gain efficiencies in the supply chain through the automation of the shipment lifecycle.

Relationship integration: To enhance communication among suppliers and customers involved in the supply chain, companies can leverage relationship integrations in the supply chain process. These types of integrations also can include internal integrations throughout the supply chain management departments in a company.

Supply chain specific integrations: Through digital transformation, companies can enhance various aspects of their operations. For example, implementing an accounting automation solution from Chain.io can lead to improvements in payments, including faster and seamless transactions. In other areas of the organization, the company can address challenges that can lead to errors through the automation of bookings, milestones, and invoices.

The Importance of Supply Chain Integration

The importance of supply chain integration is demonstrated by the challenges it resolves in traditional supply chains. Through supply chain modernization, companies can effectively address many of the problems that persisted in their industries, including the following:

Inadequate staffing: Supply chain digital transformation has helped companies better adapt to the ongoing labor crises and lack of internal resources. When systems are automated and data is connected for better visibility, supply chain and logistics tech teams have more time to focus on more critical tasks.

Order changes and cancellations: Most companies face returns or products and cancellations of orders. With enhanced supply chain visibility, company leaders can quickly make decisions to manage excess products in their warehouses.

Delayed deliveries: Businesses also can face challenges on the front end of the supply chain if suppliers are late with the delivery of components or products. Through increased logistics efficiency, businesses can gain insights that can help them more quickly navigate barriers to getting products to customers on time or keeping customers informed about estimated delivery time.

Equipment failures: Challenges of supply chain integration can emerge with the breakdown of manufacturing equipment. Companies need to address solutions that could help them adjust in the event of this problem.

An assessment of the advantages and disadvantages of supply chain integration on a regular basis can help teams be better prepared to respond to unexpected challenges in the supply chain.

Through the enhanced communications that result from an integrated supply chain, partners can ensure that they all are focused on the same goals and outcomes, minimizing errors, engaging in cost-effective decisions, and maximizing profits. They also can actively collaborate in identifying opportunities either up or down the supply chain.

Supply Chain Analysis

Through supply chain analysis, organizations can identify the areas of their supply chain management that could benefit from automations and integrations. After the COVID-19 global pandemic, many shippers, logistics service providers, and other logistics professionals have begun integrating their supply chains so they are better prepared for the next major supply chain disruption.

Incidents of a supply chain disruption in 2022 continued to include staffing shortages, logistics provider capacity issues, low inventory levels, shipping delays, increased freight costs caused by gas prices and inflation, and shifts in customer demand.

The different ways in which companies invested in their supply chain management process were evident in how well they were able to remain resilient during these varying supply chain disruptions.

Objectives of an effective supply chain management strategy include:

Enhancing efficiency. One of the leading objectives of supply chain management is the realization of efficiencies throughout the supply chain. This can include minimizing waste, reducing costs, and trimming delivery times through better management of manufacturing, warehousing, transportation, and logistics.

Improving quality. Through supply chain management, a company can identify shortcomings in components or products. Executives can better distinguish between suppliers who are or who are not delivering according to specifications, regulations, or sustainable practices.

Improving distribution. With quicker turnaround times key to profitability, businesses are invested in different ways to facilitate the delivery of products. Supply chain management can provide the insights to better navigate challenges in the distribution process and ensure optimal coordination between different transportation modes and warehouses.

Delivering on customer satisfaction. By investing in improvements throughout the supply chain, organizations can ensure that they are meeting customer expectations and boosting customer retention. Through a more efficient supply chain, companies not only can pass on cost savings to their clients — which gives them a competitive advantage, while ensuring that they are providing a quality product that enhances their brand image.

Maintaining collaboration. With different partners and suppliers involved in the supply chain, ensuring a high level of coordination and communication is critical to incentivizing and engaging all stakeholders in common goals.

Through optimized supply chain management, organizations are positioned to more quickly navigate potential disruptions.