Supply chain management is taking a whole new level with competitive advantage enhancement as the major focus. Companies are working together to ensure the maximization of customer service, sharing of profits, and reduction of costs such as transaction and investment costs. Customers, on the other hand, have become very demanding on their products needs. They are demanding high levels of product performance and also the service performance. This new change of marketing has resulted in many companies wanting to adopt supply chain standards which have various benefits.
Integration of front-end and back-end systems
Integrating between front-end and back-end systems can improve the services offered to the customers, improve productivity, and result in better returns on investment. The Back-end systems include human resource, ERP applications, and finance while the front-end systems include sales, marketing, customer service and support, and CRM applications. The government is planning on setting supply chain standards which will enable a better integration between the two end systems within the supply chain (Holley, 2002) .
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Supply chain integration involves synchronizing and collaborating managing information systems within a supply chain. Without this integration, most of the back-end systems are left unexploited while the front-end systems are downgraded to basic contact, order processing, and account management functions. Although many organizations want to merge these systems, the technologies developed are often expensive, and many organizations are not ready to pay for that amount. The price is high because determining the designing the customs interfaces for the systems is costly. Some of the major costs involved are:
Managing, support, and training time
Supply chain software investment and finding compatible information systems within the chain
Risk of stoppages made during production
Opportunity costs
However, the Congress has set $47 million which will be used to help build up supply chain integration standards. The US House has also approved the legislation and the Enterprise Integration Act of 2002, although it is still in the Senate awaiting the senate’s action. The legislation experienced no resistance, and it is likely the Senate will approve it too. Moreover supply chain integration is backed by industries. The front-end and the back-end, when emerged, will have the same importance within the supply chain.
Supply chain integration will change ways in which products and services are produced, designed, and delivered. Supply chain integration ensures customer service index is expanded by detecting and preventing problems in early phases. There are many upcoming supply chains and therefore for the success of the supply chain, the management has to integrate the networks of the organization with its relationships. An integrated supply chain uses management techniques of customers and suppliers associated to improve its performance in creating, distributing, and supporting raw materials into end products. Supply chain integration can only be optimized when there is a collaboration between the customers, OEMs, and suppliers, and they all have an idea of the major activities happening at all levels of the chain (Songini, 2002).
Some of the forces that are motivating supply chains to work towards increased integration are:
Increased overall quality and reduced product life cycle.
Mass customization and globalization is becoming part of the marketing mantra. Consumers are demanding products of greater variety which meet their specific needs.
Most companies are hoping to minimize product development cycles to remain relevant and competitive among other companies especially emerging companies. Companies introducing new products mostly get rewards with a large market share which drives the costs of existing costs down.
Increased cost effectiveness. Supply chain integration is looking forward to reducing costs by improving efficiency within their supply chains.
For companies to manage their supply chain operations the integrated supply chains involves the following changes:
Collaboration of companies with supply chain partners and coordinate operations
Restructuring of the supply chain organizations and are rescaled to achieve the set goals.
The company has to enable the usage of World Wide Web and technology since they are the major contributors of supply chain strategy.
Ways in which companies integrate supply chains
Supply chain integration takes place in different levels. The first step of supply chain integration is selecting specific vendors. These vendors are required to supply definite inputs as well as grant an accord which is used to set quantity of inputs to provide throughout the year. This ensures that the company has a plan and that it has materials needed for the production of expected products according to the needs of the customers. A supply chain involves all parties engaged in fulfilling a purchase which includes raw materials, product manufacturing, transporting the end product and supporting services. Therefore all parties should join together. The next level involves the integration of companies while the last level is called vertical integration. In this level, ownership of the supply chain of a company is now under the company (Thibodeau, 2002).
Benefits of setting supply chain standards in improving supply chain management
Supply chain management is the running of a set-up of ventures which are interconnected and involve the production of end products and services which are required by the customers. A supply chain management involves five basic components that is; planning, developing, making, delivering and returning. System Application Products (SAP) has a group of developers whose main agenda is to center on integrating production and the supply chain applications to function as a single system. These products will join all operations from procurement of the raw materials to the transportation of finished goods. Setting this SAP software will have the following advantages; reduce the overall operating systems, improve the inventory turns, improve the quality management, reduce capital needs, and reduce manufacturing cycle times ("supply chain management," n.d).
Reduction in inventory requirements and reduction of transaction costs
One of the major benefits of supply chain amalgamation is the minimization of inventory and transaction expenses which leads to costs savings. This reduction results from increased speed in which transportation of raw materials through the supply chain and safety stocks reduction. Safety stock is reduced by responding faster to changes that affect market demands. The company does not have to purchase large quantities of products than required. It, however, orders the products to be delivered to different customers as needed. This reduces the number of products managed and stored in warehouses waiting to be delivered. The company responds to a specific supplier for a specific product, and therefore, there is the advantage of having a guaranteed customer.
Forecasting and planning
Using Supply Chain standards, organizations will be able to foresee early demands that the customers make and therefore plan their production and procurement accordingly. This will avoid purchases of unnecessary raw materials, prevent the need to stock up excess finished goods, get rid of overruns in manufacturing, and reduce transport costs incurred when transporting products off warehouses. Planning and forecasting will generally improve the company's supply chain network.
Improve logistics
Large companies or companies that are expanding globally will experience increased supplies, and as they become more, the supply chains become more complex. Therefore, coordinating the transportation of these products and warehouses will appear to be a bit tedious without supply chain standards. Supply chains improve the businesses delivery efficiency as well as enhance client satisfaction through ensuring that refined goods are well warehoused and properly distributed on time despite of the quantity of associates that are participating. The coordination of the warehouses and the partners is made easier and manageable (Van der Laan, 2010).
Improves return management process
Supply chain standards simplify and quicken the handling and inspection of goods on both sides of the businesses; selling and buying. Supply Chain software computerizes the process of claims that the suppliers and distributors make which improves the contract management between the two parties and managing of the product lifecycle. The standards enhance the collaboration between businesses.
Disadvantages of supply chain integration
However, supply chain integration meets the following disadvantages: heavy investment of capital, time, and other resources which are required to make the supply chain operational. This is the reason why many organizations are finding it had to have the supply chain software.
Conclusion
Supply chain integration is the best and efficient way of increasing customer service index. However, Seamless supply chain integration can be challenging, but it is attainable if the requirements are met such as relationship management, process improvement, and strategic alignment among others. The parties involved should ensure that the entire process is well managed in one database and all parties should be on the same page. Sharing the same version of information will ensure that the parties make accurate and faster decisions. In addition, if the company wants to achieve faster results, it should reduce duplicated activities, that is, they should not perform one activity more than once. Supply chain integration requires the right mindset and should not be treated as a technology project where it just happens that different ERP systems are joined together. The final customers should receive attention by ensuring that the final product meets his/her specified needs. Lastly, supply chain integration should take place face to face, because, ideas seem to flow faster when people interact face to face.
References
Holley, C. J. (2002). The urge to merge: Integrating front- and back-end systems. Customer Inter@ction Solutions , 21(3), 38-41. (ProQuest doc ID 208160220). Retrieved from https://www.highbeam.com/doc/1G1-92682905.html
Songini, M.L. (2002). SAP plans apps to link plants, supply chains. Computerworld, 36(45), 20. (EBSCO Accession Number 7887672)
Supply Chain Management. (n.d). retrieved from www.itinfo.am/eng/supply-chain-management/
Thibodeau, P., (2002). Supply chain standards up for federal funding. Computerworld, 36(42). (EBSCO Accession Number 7587647)
Van der Laan, J.W. (2010). Supply Chain Integration for “Excellent Organization . Retrieved from www.retaileconomics.com/supply-chain-integration/
