Defining the Future of Integrated Supply Chains

Supply Chain Integration Defining Integrated Supply Chains in the 21st Century Collaboration and the ability to orchestrate complex purchasing, procurement, quality management and fulfillment strategies typify integrated supply chains today. These lessons learned and more are found in the article, Integrated Supply Chains to be Explored (Johnson, 2007). Also alluded to in the article is the concept of having a 360 degree view of global supply chains, with the added benefit of being agile enough to adapt to business models that are changing rapidly in the marketplace (Johnson, 2007).

These concepts are only a partial definition of what an integrated supply chain is in the 21st century. This paper defines in greater detail what an integrated supply chain is today, where it is going in the future, and what the key elements and challenges are to creating and successfully managing one over the long-term.

Presented in the following sections is an overview of the key elements of an integrated supply chain, the challenges inherent in creating and managing one, and what benefits firms gain from implementing superior supply chain management systems and processes. Key Elements An integrated supply chain is predicated on distributed sourcing, procurement and order management, orchestrated across a diverse base of suppliers that are managed to a specific series of business goals and strategies and in many cases, tight business model constraints.

The integrated nature of the globally-based supply chain of Toyota Corporation is a case in point, highlighting the key elements of supplier onboarding, supplier relationship management, intensive use of analytics and key performance indicators (KPIs) to measure performance, and extensive quality control standards to ensure consistency of supplier performance (Dyer, Nobeoka, 2000).

Integrated supply chains are tightly integrated to each phase of a firm's business model, from initial primary activities including inbound logistics, operations, outbound logistics, marketing and sales visibility to the forecast level, and support for after-market service including maintenance, repair and overhaul (MRO). Unifying each of these areas is often a common, enterprise-wide resource planning system, often called an enterprise resource planning (ERP) system (Hofman, 2004).

Increasingly supply chains also have tight integration to the firm infrastructure level of enterprises as well, with support for enterprise-wide security models being commonplace in the most advanced supply chains (Rogers, Lockman, Schwerdt, 2004). This integration of supplier relationship management also extends into human resource planning and workforce optimization programs as global manufacturers strive to ensure the best possible production workers are available when parts arrive to complete assembly and production, as Toyota's Production System does for example (Dyer, Nobeoka, 2000).

21st century integrated supply chains also will increasingly rely on advanced networking g technologies to capture inbound sales data and use analytics techniques to better measure and predict demand for products and services. It's not necessarily going to just be the existence of integration points throughout a supply chain network, but the accuracy and speed of the information being shared network-wide. It's the velocity of data and its relevancy that make more valuable than simply reporting back transactions and aggregating them together for financial reporting (Hofman, 2004).

Integrated supply chains will deliver much greater value in terms of the insight and intelligence they will provide across the entire ecosystem of a business than merely reporting back transactions for purposes of financial reporting alone. The role of ERP systems as the central reference point for collecting accounting and financial data, then reporting it back is in many ways becoming replaced by more agile, forward-looking approaches to measuring supply chain performance. This can be seen in the Walmart integrated supply chain and its performance relative to competitors.

Using the value chain framework defined by Porter (1986) the globally integrated Walmart supply chain is illustrated in Figure 1, Value Chain Analysis of the Walmart Integrated Supply Chain. Walmart has been able to engrain technology on a selective basis to ensure the highest levels of integrated supply chain performance, reaching a level of efficiency few if any of their competitors can match. The result is a continual focus on process improvement sand seeking out areas where greater integration can lead to more profitable, efficient operations.

Figure 1: Value Chain Analysis of the Walmart Integrated Supply Chain Sources: (Porter, 1986) (Walmart Investor Relations, 2014) (Hofman, 2004) (Dyer, Nobeoka, 2000) Challenges and Benefits of Creating and Managing an Integrated Supply Chain There are a myriad of challenges increasing a tightly integrated global supply chain to the scale of Walmart. Many corporations will focus on how to create a unified, tightly integrated supply chain by aligning efforts first with a specific business strategy as Toyota has down with their production systems (Dyer, Nobeoka, 2000).

Change management, support for varying levels of technology adoption across suppliers, the need for creating a cohesive approach to tracking and reporting transactions and amounts in addition to successfully implementing collaborating planning, forecasting and replenishment are the main challenges in creating an integrated supply chain. Of these, the most challenging to manage is change management and getting suppliers to modify how they are doing work today so their practices will better align with overall strategic goals (Dyer, Nobeoka, 2000).

Measuring the success of integrated supply chain begins by focusing on cost details, contributions of suppliers to better inventory performance, reduction of order cycle times and the attainment of the perfect order (Hofman, 2004). Figure 2, AMR Research Hierarchy of Supply Chain.