Definition

An Integrated Supply Chain (ISC) is one that has full responsibility across the corporation (including different divisions, business units and geographies) for the planning and management of all activities involved in end-to-end supply chain processes, including direct sourcing and procurement, conversion/manufacturing, and all logistics management activities.

(Source : Supply Chain Digest, The Logistics Institute Georgia Tech)

Reasons for ISC

Manufacturers Goals Suppliers Goals

Reduce costs Reduce duplication of effort Improve quality Reduce lead time Implement cost reduction program Involve suppliers early Reduce time to market

Increase sales volume Increase customer loyalty Reduce cost Improve demand data Improve profitability

The 3 Vs are the essence to good supplychain management

Velocity
Better management of variability results in an improved, more efficient and faster supply-chain

Variability

Visibility of these flows enhances the organizations ability to manage, control, and affect change proactively

Visibility

You cant manage what you dont see: Up- and downstream visibility into product, information and money flows

Improving visibility is the first step to better supply-chain management.

Steps In Integrated Supply Chain

Integrated SCM usually begins with the manufacturer integrating internal processes first. The company tries to integrate the external suppliers. The last step is integrating the external distributors.

Vertical Integration
Vertical Integration
Raw material (suppliers) Backward integration Current transformation Iron ore

Examples of Vertical Integration

Silicon Beverage

Steel

Automobiles

Integrated circuits

squeezing

Forward integration

Distribution systems

Circuit boards

Finished goods (customers)

Dealers

Computers Watches Calculators

Labelling

Keiretsu Network Strategy

Japanese word for affiliated chain.

System of mutual alliances and cross-ownership

Company stock is held by allied firms Lowers need for short-term profits

Links manufacturers, suppliers, distributors & lenders

Partnerships extend across entire supply chain

Issues in an Integrated Supply Chain

Local optimization - focusing on local profit or cost minimization based on limited knowledge Incentives (sales incentives, quantity discounts, quotas, and promotions) - push merchandise prior to sale Large lots - low unit cost but do not reflect sales Bullwhip effect - stable demand becomes lumpy orders through the supply chain

Opportunities in an Integrated Supply Chain

Accurate pull data Lot size reduction

Single stage control of replenishment

Vendor managed inventory

Postponement

Opportunities in an Integrated Supply Chain

Channel assembly Drop shipping and special packaging Blanket orders Standardization Electronic ordering and funds transfer

Measures of integration
Access to planning system Sharing production plans Joint EDI access / networks Knowledge of inventory levels Packaging customization Delivery frequencies Common logistical equipment / containers Common use of third-party logistics

Managing supply chain relationships

How can broader-based relationships be formed between trading partners in the supply chain?

Managing supply chain relationships

Creating closer relationships
Arms length transaction R&D Logistics
Information system

Partnership

Marketing Operations
Information system

Marketing R&D Logistics Operations

Information Information system system

supplier

customer

supplier

customer

Factors in forming supply chain relationships

The order winner
The method making sourcing decisions The nature of electronic collaboration The attitude to capacity planning Price negotiations

Managing product quality

Managing research and development The level of pressure

Efficient consumer response

How can collaboration be extended across the supply chain to focus on meeting consumer demand?

Efficient consumer response

Category management Establish infrastructure Optimize introductions Optimize assortments Optimize promotions

Product replenishment

Integrated suppliers

Synchronized production

Continuous replenishment

Automated store ordering

Reliable operations

Cross-docking

Enabling technologies

EDI

EFT

Item coding and database maintenance

ABC

Efficient consumer response

Enabling technologies
Scanning data Data warehousing Data mining

The data should include

Demand / consumption / sales information Cash flow Stocks of finished goods / work in progress Delivery and output status

Efficient consumer response

Category management
management Demand management Required Multifunctional selling teams capability Price list restructuring Effective and customized promotions
Account

Continuous replenishment
Joint

Enabling technologies
Effective

inventory management Cross-dock operations Continuous replenishment Effective logistics and product flows Quick response

information sharing Automated order generation Bar-coding and the use of other scanning technology

References
White Paper on the Integrated Supply Chain Aerospace Industries Association Operations Management by R. Dan Reid & Nada R. Sanders Principles of Operations Management, 5e, and Operations Management, 7e Heizer /Render, Prentice Hall http://www.cessna.com/index.html http://www.ceeandgee.com/index.php - C & G International, Inc. http://www.transportgistics.com/index.htm