Integrated Supply Chain

Integrated Supply Chain

309 – Arpan Mehra311 – Sunny Parekh

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

Manufacturer’s Goals

Reduce costs Reduce duplication of

effort Improve quality Reduce lead time Implement cost reduction

program Involve suppliers early Reduce time to market

Supplier’s Goals

Increase sales volume Increase customer

loyalty Reduce cost Improve demand data Improve profitability

The 3 ‘V’s are the essence to good supply-chain management

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

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

Visibility of these flows enhances the organization’s ability to manage, control, and affect change proactively

Variability

You can’t manage what you don’t see: Up- and down-stream visibility into product, information and money flows

Visibility

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.

Raw material (suppliers) Iron ore Silicon Farming

Backward integration Steel

Current transformation Automobiles Integrated

circuits Flour milling

Forward integration Distribution systems Circuit boards

Finished goods (customers) Dealers

Computers Watches

CalculatorsBaked goods

Vertical IntegrationVertical Integration Examples of Vertical Integration

• 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

Keiretsu Network Strategy

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

Channel assembly

Drop shipping and special packaging

Blanket orders

Standardization

Electronic ordering and funds transfer

Opportunities in an Integrated Supply Chain

– 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

Measures of integration

Managing supply chain relationships

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

• Creating closer relationships

Managing supply chain relationships

R&DLogistics

Information system

MarketingOperations

Arm’s length transaction

Information system

Marketing

OperationsInformation

system

Partnership

Information system

R&DLogistics

supplier customer supplier customer

– 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

Factors in forming supply chain relationships

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

Efficient consumer response

Establish infrastructure

Optimize introductions

Optimize assortments

Optimize promotions

Integrated suppliers

Synchronized production

Continuous replenishment

Automated store ordering

Category management

Product replenishment

Reliable operations Cross-docking

EDI EFTItem coding

and database maintenance

ABCEnabling technologies

• 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

Efficient consumer responseCategory

managementContinuous

replenishmentEnabling

technologies

Required

capability

Account managementDemand managementMultifunctional selling teamsPrice list restructuringEffective and customized promotions

Joint inventory managementCross-dock operationsContinuous replenishmentEffective logistics and product flowsQuick response

Effective information sharingAutomated order generationBar-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