Today, many companies are considering integrated supply chain solutions for their processes, owing to the many benefits that come with integrating a supply chain. To understand how significant a supply chain integration is, think about baseball players. For the team to function well and not lose out to its opponents, the catcher and the pitcher must first agree on what to do. After the two agree, they go ahead and inform other players about what they need to do and what positions they need to take. When the team does this, each and every member of the team plays his role, contributing to the general success of the team. The reverse is also true; when the pitcher, catcher, and other members do not communicate well, they will not know what positions to take to defend the team. Similarly, a typical supply chain involves five components; planning, sourcing, manufacturing, delivering and returning. A supplier, manufacturer, distributor, and consumer are involved in the chain. If a supply chain manager integrates these components, many benefits come with it. This article discusses the top five benefits of integrating a supply chain.
- Increased flexibility and visibility
One of the main drivers and results of integrating a supply chain and its operations is the increased flexibility and visibility of the supply chain. This is because an integrated supply chain has all of its activities related and being monitored from a central point. When need be, the chain can affect any fluid decisions without causing any major interruption in the chain. This is unlike an unintegrated supply chain. In such a chain, making decisions real-time is almost impossible, and when made, the system becomes vulnerable to minor and major disruptions.
Increased visibility means that all the supply chain activities are under watch. And because the activities are interconnected, all the departments involved in the supply chain are kept updated about the occurrences within the supply chain. This means that communication across the departments is easy and maximized. Both flexibility and visibility are important in making a supply chain successful. The supply chain is fast-changing and growing, and flexibility is what helps supply chain businesses to stand up to competition and still generate revenue amidst the hardships. A rigid supply chain can easily die out in the market, as it is not resilient enough to recover from the shock that may come with supply chain dynamics.
- Waste elimination
Another top benefit of integrated supply chain solutions is waste elimination. A system that has integrated its supply chain operations enjoys the benefits of reduced waste generation and subsequent elimination. As a company tries to integrate its supply chain operations, it must have waste cut own, reduction, or elimination as one of the key drivers. The driver ends up being a benefit at the end of the process! Companies that have their supply chain operations integrated have great oversight and cohesion, which ensures waste elimination.
A good example is a company that manufactures paper. Because the company is environmentally cautious and tries to meet environmental regulations, it will explore other raw materials options and not cut trees as the primary source of raw materials. All the departments of the company are integrated, and so communication is smooth. A driver transports raw materials to the company, and on its way back, it delivers the finished products. This way, the lorry reduces the number of gaseous emissions released into the atmosphere. Besides, instead of having many lorries that pollute the air, the company contracts half the original number, reducing the total gaseous waste released to the environment.
- Centralization of data and demand-meeting ability
Another benefit that an integrated supply chain enjoys is the centralization of data which translates to the supply chain’s ability to meet market demands. Because of the increased visibility in the supply chain, the company can access any information wherever it wants and in real-time. The increased visibility creates a highly centralized data cache in the company, a prerequisite for the supply chain’s success. A supply chain’s success points are imperative to the centralized data that creates a lot of insight into the chain. And because the company has all it needs in terms of data requirements, it easily stays on top of the demand. It can use demand-supply algorithms to predict the consequences of certain courses of action and make informed decisions. For instance, when a seemingly promising trend comes up, an integrated supply chain will go to its algorithms and past data and predict the likely consequences before deciding the specific course of action to take. The same is true when an opportunity that looks seemingly risky comes up; the company goes back to its information cache and analyzes the consequences before deciding to pursue that course or discard it. This way, an integrated supply chain stays on top of the demand, no matter the challenges that it faces.
- Widened profit margins
The ultimate benefit of increased visibility and flexibility, waste elimination, and data centralization in a supply chain is improved profit margin with the supply chain. Because of increased visibility in the supply chain operations, all the activities in the company happens transparently. With transparency in place, all the departments in the company communicate with one another in real-time when a fluid decision is to be made, affecting the decision instantly. An integrated supply chain is agile. This means that when it faces any shock, its flexibility enables it to recover from the shock without suffering any major constraints in the supply chain. Besides, when an organization cuts down on wastes, it indirectly saves on resources. In the example of the paper industry that uses half the number of lorries saves fuel and money that would be used to buy the fuel. In the long run, all these benefits lead to one major benefit- widened profit margins.
In knowing the importance of integrating a supply chain, looking at the benefits such a chain enjoys will be critical. The article has discussed the top benefits of integrating a supply chain, including increased visibility and flexibility, waste elimination, data centralization, and a widened profit margin.