Introduction

In the previous decades, most companies focused their supply chain initiatives on
reengineering supply chain cost structures. These initiatives were driven primarily by
corporate restructuring and internal improvement as company strategies responded to
the accelerated opening of global markets.
In this decade we see a new driving force in corporate strategy: delighting customers.
Customers have become increasingly demanding, expecting ever-higher levels of
product and service performance. Gradually, in industry after industry, customers are
coming to expect greater customization of products and services to their individual
needs. At the same time, they are also used to a constant stream of innovations in the
goods and services they use that either reduces the cost or improves the benefits they
receive.
Traditional four Ps of marketing (Product, Price, Place, Promotion) are changing
places for the new four Cs: Consumer, Cost, Convenience, and Communications.
Companies must:

Focus on consumers, not products

Understand cost to satisfy consumers, not sticker price
Learn how consumers want to buy (convenience), over determining place of
purchase
Concentrate on communications with consumers, not just promotions.

Definition, objectives and benefits

Supply chain integration is the effective and efficient road to maximizing customer
service index. By integrating processes of different links in the chain it is possible to
prevent problems in an early phase. The result is a very low multiplier effect of failures
and moderate prevention costs. Also the levels of interface stocks can be greatly
reduced, adding to the cost savings. A famous one-liner to describe this development is
to substitute inventory by information.
Overall objective of Integrated Supply Chain initiatives is that it is more profitable for all
parties involved. This is not a zero-sum game.
Integrated Supply Chains encompass three major structural changes in how
companies will manage supply chain operations:

Companies will collaborate with supply chain partners and synchronize

operations
Technology and the world wide web will be key enablers of innovative supply
chain strategy
Supply chain organizations will be restructured and re-skilled to achieve these
goals

Integration
Process
Integrating
a
supply chain is
an incremental
process,
with
priority typically
given to the highest potential returns on investment. Based on strategies, needs, and
potential returns, different priorities and approaches may be assigned to the supply
chains of different segments of a business. The integration process can be expensive
and is, in many respects, an exercise in resource allocation.
Many companies adopt an approach that begins at home and gradually works outward
through the supply chain. The first step is to make in-house improvements, such as
inventory reductions that can reduce working capital, warehousing, and transportation
costs. An analysis of in-bound logistics can often reveal opportunities for savings. From
there, the integration effort expands outward.
This chapter begins with the topic of supplier selection, introduces approaches to
integration, discusses management of the integration process, and identifies
management tools that are becoming available to support this effort. The factors critical
to success are then identified, and metrics for evaluating progress and performance
are suggested.
COSTS OF INTEGRATION
The costs, complexities, and risks of fully integrating and managing a highly integrated
supply chain can be as substantial as the costs of integrating and operating a
corporation of comparable size. Thus, most supply chain integration efforts to date
have been very limited in scope. Some of the major costs are listed below:
time devoted to managing, training, and support
effort devoted to becoming a better customer
investment in supply chain integration software and compatible information
systems throughout the chain
Opportunity costs (i.e., investments in supply chain integration may necessitate
foregoing other business opportunities)
risks of production stoppages

Conclusion