When you are establishing a better supply chain network, then it requires efficient collaboration among various stakeholders of the company. Organizations used to follow a one-way communication strategy while managing their SC operations. It led to the point of SC integration, where you bring various parties on a single platform. Today, we’ll discuss supply chain integration strategies.
What is Supply Chain Integration?
Supply chain integration is the process of developing a single system that would bring various stakeholders on one platform in order to achieve efficiency; in terms of cost saving and high productivity. The objective of SCI is to develop an efficient system starting from the raw material supplier to the finished product and delivering it to the end consumers; without poor customer experience, delays, or excessive cost.
Integration helps businesses and companies to develop better SC networks. It comprises establishing a transparent system and network from suppliers to end consumers.
Components of Supply Chain Integration
Some of the main components of supply chain integration are as follows;
Selecting Right Supplier
Businesses and companies should select the right supplier and vendor that would satisfy the quality standards and requirements of the company; along with delivering the supplies at the right time and at the right place.
Collaborating with Internal Team
Companies should collaborate with the internal team in the SC network across the organization. It results in the form of efficient SC processes by bringing the internal team on board with the SC integration system.
The focus of businesses and companies is to decrease wastage from the SC processes. They can make manual changes by recognizing the gaps in the purchasing software.
Supply Chain Integration Strategies
Some of the main supply chain integration strategies are as follows;
Push SCI Strategy
The SCI push strategy is suitable when the forecasted demand outlines the input of the process. Companies employ a push strategy based on the demand forecast to find out the amount of stock they need to order.
For instance, a manufacturer or producer won’t produce Christmas gifts until the customers visit its stores and place orders for the Christmas decorations. Rather, it should make a decision of producing gifts prior to the holiday season based on the estimated and forecasted demand. Some of the main traits and characteristics of the push SCI strategy are as follows;
- Better forecasting in the SC network would make businesses select a push strategy
- Demand forecasting is its key element
- Companies implementing this strategy have got better production planning to deal with the needs
- Offers committed storage space and accessible inventory
- Giving retailers sufficient time for preparation
Some of the key challenges to the push SCI strategy are as follows;
- Bullwhip effect
- Difficult to forecast customer demand in the long term
- Making accurate forecasts is rare
Pull SCI Strategy
The pull SCI strategy depends on the actual customer by employing real-time in order to make accurate inventory orders. Product supplies and the production process is reliant on the actual customer demand based on regular consumption. However, the focus of the pull SCI strategy is procuring inventory at the right needed time. It allows you to quickly react to the changing market demands.
For instance, a carpenter receives an order from a customer, and his team inquires about all the details and requirements from the customer like the type of wood, furnishing, color, locks quality, and other things. After clearly knowing the order details, the carpenter procures all the necessary materials and raw supplies for the production of the furniture.
- Manufacturing goods and products based on the demand rather than forecasting demand
- Employing accurate mechanism
- Quick flow of information
- Transforming distribution facilities ranging from storage points to the coordinator of flows
Some of the main challenges to the pull SCI strategy are as follows;
- Difficult to exploit economics
- It is difficult to respond to the demand information when the lead time is low
Push-Pull SCI Strategy
As the name implies, companies employ both push-and-pull SCI integration strategies. They maintain inventory of 100% certain supplies that won’t perish easily and the rest they finish the product based on the customer orders.
- Companies employ push and pull SCI strategies at various stages of the SC process
- Push approach at the back end of the company’s operations
- Pull approach at the front end of the processes
High Bargaining Power
It happens to large companies that have got big orders, and it offers them the bargaining power of keeping the price down to the suppliers. Walmart and Amazon are great examples of high bargaining power and use it to their advantage.
Low Industry Rivalry
Mergers and acquisitions allow businesses and companies to remove small competitors from the market. When small competitors are out of the market, they have got a stable price and don’t need to go on a price war with anyone.
Replicating Business Model
The replicating business model allows businesses and companies to deal with low-cost and high-product differentiation. For instance, Walmart is employing the low-cost and discounted business model to maintain its supermarket position in the US. It is also replicating the merger and acquisition model in other countries to expand its market.
Integrating product lines after merger and acquisition helps the company to offer innovative product offers and bundles to customers at different price ranges.
Economies of Scale
Economies of scale is a very useful business model in those industries that have got a fixed cost structure; it helps them to decrease the per unit cost.
Conclusion: Supply Chain Integration Strategies
After an in-depth study of supply chain integration strategies; we have realized that SCI allows companies to unify their process by bringing various parties on the same page. If you are learning about the SCI strategies, then you should keep in mind the abovementioned practices.
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