Wider Supply Chain Integration Leads to Performance Advantages

Supply chain management and integration has important functions for businesses that desire to create higher levels of financial performance. Since all companies work with related companies in either formal or informal linkages, such as suppliers and distributors, it is important to ensure information is transferred effectively between entities to enhance operations on both sides. Research by Kannan & Keah (2010) show how companies that integrate their supply chains to a wider extent develop a number of advantages. 

Supply chain management entails businesses associated with the development, building, distributing, and returning of products/services. It has been defined as the “cross functional integration within the firm and across the network of firms that comprise the supply chain” (Lambert, 2004). The management of supply chain has come to mean better integration with the supply chain elements to produce value. 

Integration is the creation of inter-firm linkages. Sharing information, building stronger ways to coordinate resources and collaborating on mutual goals creates efficiencies. These efficiencies may lead to cheaper processes, faster movement of products, or better attainment of resources. The functioning of the supply chain has a direct effect on the success of the organization.

There are reasons why some firms seek narrow integration versus wider integration. The factors leading to higher levels of performance can be difficult to understand and master. Significant research, resources and time are invested into the supply chain to create higher levels of efficiencies. Being too wide in orientation can lead to lack of focus and goal confusion. 

The researchers found that by moving beyond first tear suppliers offered significant savings and performance improvements that result in faster product development times, higher sales and strengthened quality. The second tier suppliers have a significant impact on how the whole system functions as an entity. Those companies that fail to consider information from second tier suppliers have a lack of context in which to understand supply chain information putting them at a disadvantage. 

Kannan, V. & Keah, C. (2010). Supply chain integration: cluster analysis of the impact of span of integration. Supply Chain Management, 15 (3). 

Lambert, D. (2004), Supply Chain Management: Processes, Partnerships, Performance. Supply Chain Management Institute, Sarasota, FL.

Adaptive Supply Chains that Respond to Environmental Events

Supply chains can be complex dragons that fail to adapt and change when the market changes or unforeseen circumstances rear their ugly head. Static systems are fixed and have a hard time adjusting without great cost or difficulty. Research by Dr. Dimitry Ivanov helps highlight the interconnected nature of supply chains and adaptive adjustments within networks that are interlinked to the supply chain strategy, design, planning, and operations (2009). A fundamental adjustment in the feedback information and structure of the chains is needed.

Each of the components of a supply chain functions together to create an efficient system that delivers products and services to customers. Using technology and modern theory in supply chain management helps to ensure the network is updated, adjustable, and running at maximum efficiency. Each of these components is aligned with management’s goals and the appropriate measurements that ensure goal attainment (Kreipl & Pinedo, 2004). 

There are common actions to improving supply chains that include:

1. Collaboration along the value chain to acquire raw materials, convert materials to new products, and deliver final products. 

2.  Application of modern concepts and technologies to create responsive, flexible, cost-effective, sustainable, agile, and competitive networks that raise customer satisfaction and improve profitability.

Shocks can happen to the supply chain at any time. Some of these include the adjustments from war, suppliers that go out of business, political fighting that damages the flow of products, or natural disasters that disrupt the infrastructure. Organizations should attempt to develop adaptive networks by engaging in incremental planning that seeks to predict situations based on models, understanding how the supply chain reacts to external shocks, and getting a grasp on how the supply chain interacts with the external market. 

Adaptability within supply chain networks requires the ability to think about alternatives in a systematic way.  Organizations can create multi-structural designs that ensure each of the chain components fosters the fulfillment of customers’ needs through the development of alternative strategies and delivery systems when any of the components are non-functional.  Using new technology the standard open slot system can be upgraded to provide strong feedback data that allows for faster adjustments to uncontrollable events.  This information is matched with stronger decision-making abilities of managers who implement new strategies and adjust existing strategies. 

Kreipl, S. & Pinedo, M., (2004). Planning and scheduling in supply chains: an overview of issues in practice. Production and Operations Management, 13 (1), 77–92.

Ivanov, D. (2010). An adaptive framework for aligning (re)planning decisions on supply chain strategy, design, tactics, and operations. International Journal of Production Research, 49 (13).