Integrated supply chain refers to a kind of supply chain management where all activities, from packaging, procurement to distribution and supply, are centralized to promote an enterprise approach on resources. Find out its benefits here.
Supply chain integration promotes cohesion in a company as all supply activities are not done independently. Relations are enhanced in the value chain as there is connectivity in the entire supply chain. This may include centralizing procurements of raw products, finished packaging goods, logistics, and connections with suppliers, distributors, and customers. A supply chain based on an integration approach is more effective as the management controls all areas and is easy to cope with changes in consumer demands, competitor’s activities, and more industrial situations.
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Advantages of Integrated Supply Chain Management
Firms that use an integrated supply chain approach enhance flexibility to meet their demanding factors and useless cost in daily business operations, profiting the business as a whole. Gains that come with this type of approach include;
Flexibility
A company’s flexibility is important in a competitive industry sector. Its ability to change and adapt is highly dependable on the kind of supply chain management used. A tight chain integration system allows the management to quickly respond to the firm’s internal and external issues. Common issues that require quick flexibility include demands from consumers and actions of competing enterprises in terms of prices and quality production. The management obtains information from their supply chains and plans on how to deal with the emerging situations.
For example, a company needs to have the just-in-time flexibility ability to deal with heightened freight charges. An integrated system minimizes the company’s cost on space issues and benefits the addition of inventory daily. A company may also get information on their competitor’s new products from the supply chain and use it to modify their products and launch them to withstand competition.
Reducing waste
Eliminating the waste of resources and costs is an objective in many companies. Reducing waste allows a company to save more and practice manufacturing in more controlled management. For a firm to reduce and eliminate waste, the factors leading to the excess costs must be known and understood. Excess supply, inventory distribution delay, high transport costs, and ineffective supply chain management are common factors that lead to high manufacturing costs and unexpected losses.
A centralized supply chain is needed to solve the above problems and cater to more savings from reduced operating costs. An integrated system will effectively minimize costs in several departments. For example, transportation and distribution costs are minimized. There is a well-known ready market for the company and good route management. Warehouse costs are cut off as the supply matches the consumers’ demands minimizing space charges. Functions are connected and controlled by one supply management which allows the management to focus on areas that will yield more profits and cut expenses. A centralized approach to the supply chain allows companies that supply the same products to merge in distribution activities. This leads to sharing of costs, and each firm may save more.
Good Stock Management and Reduced Costs.
An integrated supply system enhances inventory control and management. Reduction of resource wastage and flexibility results in lower costs of operation. Stock management is important to business success. The sale of inventory leads to profits or losses depending on the firm’s strategies. Overstocking leads to high costs on storage, while understocking could make a company suffer losses as it loses its customers to competitors.
Tight integration supply chains enhance speed in production to delivering of products. It facilitates the adjustment of retailer inventory to meet the consumers’ orders and demands. Speed is important in a business supply chain as raw materials and finished products are fetched and distributed. Well-integrated supply systems result in just-in-time production and delivery.
Reduced costs are facilitated by a consistent supply, good inventory management, and sharing of costs. A company that shares operation costs in a supply system management saves on cost and meets the delivery time of ordered goods at lower costs. It’s efficient as no quality is lost and more information is gained about consumer’s preferences and competitors’ actions.
Increased Profit Margins and Better Planning
The main objective of any business is to make a profit. Each process and action was taken by the management is to facilitate cash flow into the company. Supply chain integration plays a pivotal role in increasing the firm’s profits. It also provides a basis for planning and a warning system to the business’s future events. The visibility of a company’s operations is enhanced.
The flexibility, ability to easily adapt to problems, and good stock management favor lower costs to be used in the business structure, which leads to higher gains. As small enterprises and companies respond quickly to consumer and competitive changes, they compete relatively. They can maintain their profile and even expand their business. This type of supply chain helps the management to plan well on the upcoming activities. A good plan meets all the expected risks and helps save on cost. For instance, suppliers might encounter cash flow problems. The company might have planned to solve this by obscuring loans from lenders to facilitate the supplier’s operations. This maintains a constant supply to the consumers resulting in more sales and profits to the business.
Conclusion
Integrated supply chain management has benefits to a business’s daily operations. This type of supply chain process is efficient and can be used by both small and big enterprises. It brings about skill use in operating the business. Having an expertise business team increases production and profit margins. A centralized approach to the supply system is more flexible than a business with multiple systems within it. A centralized supply chain enhances relationships which creates a more comfortable working environment. It also grows the manufacturer, supplier, and consumer relationship. Promote unity and the spirit of working together in a business using the integrated supply chain system to optimize production and profits.
