5 Clear Reasons for Supply Chain Integration

5 clear reasons for supply chain integration

5 Benefits of Supply Chain Integration

An integrated supply chain occurs when an enterprising resource planning approach is applied to the supply chain management process. Within supply chain integration businesses and suppliers work collaboratively to simplify and streamline all logistics and distribution activities using a centralized and standardized system.

Although the benefits that both businesses and suppliers receive from using an integrated supply chain management system are substantial, a system can be difficult to create and maintain. However, if the system is successfully implemented, 5 significant benefits of supply chain integration include-

1. Flexibility

The flexibility that supply chain integration produces allows different parties to step in in order to help each other improve efficiency and productivity levels. With so many processes occurring simultaneously and such a prevalent need for collaboration, a successfully integrated supply chain provides businesses with a significant competitive advantage in the global market.

Using the expertise and resources of various organizational units together increases the likelihood of finding a creative solution to a supply chain management issue. When the expertise and experiences of multiple third party businesses are leveraged correctly within an integrated supply chain management system there is no limit to the best practices and objectives that all can achieve.

2. Efficiency

Supply chains that are not integrated are more likely than integrated supply chains to perform tasks unnecessarily and redundantly. For example, a transportation management process could be executed twice unintentionally instead of once due to a lack of communication and failure of third party businesses within the supply chain to effectively collaborate.

Not only are repetitive tasks inefficient but they are wasteful, redundancy is a massive drain on labor costs and efficiency. When teams work together by sharing information about each of their processes in real time with one another, they are much more efficient and productive in both the long term and short term.

In fact, one Oracle study found that 82% of customers were able to increase on time deliveries through stronger collaboration. That same Oracle study discovered a 35% increase in customer satisfaction levels, indicating a huge potential for customer service optimization through the use of an integrated supply chain management system.

3. Centralization

Standardization and centralization are fundamental in any integrated supply chain management system. Thankfully, supply chain management software contains helpful tools and programs to assist with data centralization and standardization.

Data centralization ensures that the many different third party participants involved in the supply chain are working with the same information. Real time updates can be easily supplied to all third party suppliers and various supply chain management professionals in just a few clicks.

Short and long term benefits of data centralization include the ability to pinpoint areas of inefficiency and improve both sales and demand forecast accuracy.

4. Transparency

Supply chain integration boosts transparency capabilities which in turn increases efficiency, productivity, and effectiveness. Information systems and supply chain management software also provide a platform for real time transparent communication initiatives which result in long term operational improvements.

Instead of working in separate silos, disconnected from one another entirely, third party participants within the intergrated supply chain can clearly view in real time the activities and processes that one another are doing. Not only does the use of an integrated supply chain management system enhance transparency, but as a result, it also boosts accountability between third party participants.

For example, if a product arrives to a customer damaged or tampered with, an integrated supply system would be useful for pinpointing which third party participant is to be held accountable. The transparency that supply chain integration supplies positively influences customer service best practices significantly.

5. Profitability

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Integrated supply chain processes should provide significant benefits to profit margins for all third party businesses involved. Decreasing wastefulness and increasing efficiency results in less money and resources wasted throughout the supply chain, from transportation management to customer service departments.

Additionally, when businesses work together they are more likely to gain a competitive advantage by discovering innovative solutions. These creative solutions can translate into substantial financial rewards that benefit all third party participants within the supply chain.

Key Takeaways

  • Supply chain integration allows businesses and suppliers to work collectively in order to simplify and streamline logistics and distribution activities by using a standardized and centralized system.
  • All third party participants within an integrated supply chain should benefit from their involvement.
  • Significant benefits of successful supply chain integration include flexibility, efficiency, centralization, transparency, and profitability.

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