Supply chain integration strategies and implementation

Supply chain management (SCM) is a method for alleviating the way one company finds the raw materials and other components that it requires to produce a product or service and provide it to its customers. The five basic components of Supply Chain Management are planning, source, making, delivering and return. If supply chain standards are applied then the supply chain management could benefit from it a great deal and it could significantly improve things (Wailgum, 2008).

Most organizations are now starting to realize the great importance of supply chain management and that it is vital in order to survive in the fast paced and competitive global economy. This association of business relationship goes beyond the usual enterprise parameters and instead focuses to organize the whole business process through a value chain of many different companies. So due to these factors, many large companies such as DELL and Hewlett Packard and joined forces to operate strong supply networks in which each partner invests its focus on only a few specific strategic activities. This form of collusion should be encouraged as it would allow most companies from different industries to take advantage of each other's strengths while not affecting the competitive aspects of the respective markets that each are working under.

In 1999, a study had been conducted by the National Institute of Standards and Technology (NIST), in which they claimed that the auto industry alone has the potential to save up to $1 billion in supply chain savings each year as a result of improved enterprise integration. The institute also claimed that such immense savings are also possible in other industries as well such as shipbuilding and home construction (MSID Publications).

Normally, companies that are associated with supply chain management tend to focus more on the inputs and outputs of their production process, whereas not much attention is given to the internal management that is working with other companies, so therefore, the selection of an internal management control structure tends to affect the local performance of the firm more than anything.

Congress is even pondering upon the possibility of passing a legislation that would assist in the development of supply chain standards by using a funding of up to $47 million since this would allow many industries to cut back on their savings worth millions of dollars (Thibodeau, 2002). The process for the approval for that legislation is under way and there seems to be no opposition against the legislation and it is only a matter of time till it will be approved and implemented.

However, according to NIST, there are many inefficiencies that are present due to the absence of effective standardization as the purpose of the standards is to ensure that the interactions between one group and the other is fast paced so that it minimizes delays by speeding up dealings. For example, if a large electronic or automobile manufacturer changes the designs for one of its products, it allows the suppliers to quickly and conveniently see the new designs so that they could change the way their production is carried out and make changes accordingly, without having to waste much time. However, according to Jeff Eck, who works for Global Exchange Services located in Gaithersburg in the United States, among the strong points of NIST is the capability for it to give vendor neutral testing areas which is used to figure out the product interoperability.

Meanwhile, the movement and efforts towards supply chain cost cuttings will go ahead regardless of whether the funding legislation from the congress receives the green light or not; this is because most manufacturers have realized that there is significant potential in cutting back costs with the use of supply chain management and by implementing supply chain standards, a great deal of benefits will be obtained by most industries. However, the benefits for the companies to pursue and make an effort on these standards are not always apparent as the savings are mostly realized in the supply chain itself, while there is a lack of balance between since the savings are mostly with the suppliers while the power is normally associated among the manufacturers.