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Technological advances, particularly in information technology, coupled with globalization, the rise of complexity and shrinking time horizons are driving order-of-magnitude changes in the competitive demands on strategic management of business and on the management of supply chains.
These competitive pressures have a strong direct effect on supply chain strategy and integration. Integrating activities both within and beyond organizational boundaries has become and will continue to be a major challenge for supply chain executives. Integration efforts now extend beyond traditional product-process design and functional integration to focus on extra-organizational links with customers and suppliers. The object is to produce "supply chain-enhanced" products and services.Our examination of supply chain integration focuses on two key issues--alignment and linkage--both inside an organization and across organizations.1. Alignment refers to common vision, goals, purpose and objectives across organizations, functions and processes in the supply chain. Alignment ensures that there is consistency in the direction and objectives as these plans and decisions are made.2. Linkage refers to the communication and sharing of information needed for planning and decision-making, and the interaction of people involved in planning and decision-making. Linkage ensures that the information necessary for decision-making is available, and that different functions and entities in the supply chain are working with the same data as decisions are made.3. Supply chain alignment and linkage do not happen in a vacuum. Supply chain management is a part of the broader management of an enterprise, and it must support the broader business strategy of the enterprise.4. Business Strategy defines how the firm intends to compete in the markets or market segments it pursues. Broadly speaking, a firm can compete on low cost or through differentiation. Supply chains can contribute significantly to both sets of goals. However, different business strategies are likely to be best supported by different supply chains and supply chain management decisions. A business strategy based on speed of innovation and fast time to market would require a different network of suppliers, a different manufacturing infrastructure and a different distribution infrastructure than a strategy based on low costs. It is therefore critical that the strategies pursued and the decisions made by the supply chain group be consistent and aligned with the overall strategy of the enterprise.Supply Chain Strategy Planning Decisions relate to coordinating supply chain management decisions with business strategy, product/service design decisions and with designing the physical supply chain. The right infrastructure, in terms of technology, people, control systems, relationships, policies and procedures are critical in facilitating alignment and linkage.Our research identified four critical supply chain strategy areas:1. Supply Chain Strategy and Vision, which defines the role supply chain management will have in the organization and in the pursuit of the business strategy.2. Insourcing/Outsourcing Strategy, which goes to the heart of the firm's value proposition--what is it that the firm does better than anyone else--to create value for the customer. What is kept and what is outsourced depends on supply chain strategy and drives supply chain strategy.3. Supply Chain Segmentation and Architecture, which addresses the design of the supply chain, its physical structure, its information flows, its cash flows and its "conceptual" structure. Supply chain segmentation broadens the familiar concept of market segmentation to the consideration of differential supply chains (manufacturing plants, distribution centers, supply bases) to support the different market segments.4. Product and Service Design, which must include supply chain considerations in product/service design decisions. Product designs largely influence manufacturing efficiencies, distribution system requirements and customer service levels. By including supply chain perspectives, product and service designs can be more effective.
The key issue across these processes is linkage-- facilitating the communication and information sharing necessary for making decisions that are consistent and focused on meeting customer expectations. The three key supply chain processes identified in this research are:1. Supply-facing Processes for Order Fulfillment2. Sales and Operations Planning (SOP)3. Customer-facing Processes for Order Fulfillment
Through our research, we have identified 14 key challenges organizations must meet to achieve true supply chain integration.1. Establish a vision of how financial and non-financial results will improve with supply chain integration.2. Develop people, culture and an organization that supports the supply chain vision.3. Develop customer-centric metrics.4. Develop multiple supply chains to meet the needs of different customer and market segments.5. Establish the correct positioning of work on a global basis.6. Incorporate supply chain consideration into product and service design decisions.7. Maintain sourcing as a first-level priority.8. Stay focused and consistent in relationships with customers and suppliers.9. Create an effective Sales and Operations process.10. Develop valid and reliable databases, data and information.11. Develop the capabilities and analytic tools required to make effective decisions in an increasingly complex and risky environment.12. Build trust within and across organizations in the supply chain.13. Find ways to share risk equitably among supply chain partners.14. Find ways to share rewards equitably among supply chain partners.
SC integration can be upward or downward. And primarily focuses on either increasing efficiency of bringing down cost.
It should be taken care that it does not affect the core competencies of the company.
