Integrating, Coordinating
and Controlling Supply
Chain Systems
Ms Magesa PR.
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Supply Chain Integration (SCI) Definition:
The extent to which Supply Chain members
strategically cooperate and collaboratively
manage intra and inter organizational processes
to achieve mutually beneficial outcomes.
The seamless linkages from suppliers to the
manufacturer and down to the retailers
Involves the Coordination of the key Supply
Chain Flows between the channels members
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Supply chain management is the
“cross functional integration within
the firm and across the network of
firms that comprise the supply chain”
An
integration
of
materials,
information
and
financial
flow
between customer, manufacturer
and supplier
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Supply Chain integration levels
 Internal Integration – Entails the cross-functional
integration within the firm.
Materials Management
Physical Distribution Management
 External Integration - This is about the extent to
which firms integrate with upstream
and
downstream supply chain partners.
Upstream Integration
Downstream Integration
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 Electronic Integration
 Transactional – electronic execution of transactions
 Informational - electronic exchange of information
 Collaboration planning - strategic, tactical and
operational exchanges
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Rationales/Grounds for SC Integration
Supply Chain consists of multiple partners,
processes, products, markets and information.
Uncoordinated decisions and actions of
different owners may result in “Bullwhip Effect”
and inefficiencies that greatly affect supply
Chain and increase wastes.
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“Bullwhip” Effect
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 Characterized by an increase in order fluctuations as
they move up the supply chain from retailers to
wholesalers to manufacturers and to suppliers.
 Information distortion leading to a situation where different stages
in supply chain are having very different estimates of what
demand looks like.
 It Built on multiple ownerships problem
 Conflicting objectives of supply chain members
 Results from Lack of coordination in supply chain.
 Stages in Supply Chain do not take into account the effect of
their actions on other stages.
 Negatively Impacts the Supply Chain Profitability
 Excessively high inventory levels across the supply chain
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Why integrate?
Supply Chain integration Seeks to get the best from what
SCM can offer:
Visibility, Flexibility and Resilience necessary in
chaotic business environment,
Better use of company resources and finances
which may otherwise be duplicated,
Better Strategic Planning
Competitive advantage,
Mitigation of
distortion,
and
Achieving
of
“bullwhip effect” or information
Accuracy in interpretations of information and
better decision making,
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Why Integrate?
Better forecasting, on time delivery and low inventory
levels.
Predictability of sourcing and supply.
More consistence in performance and customer
services.
Increased loyalty among partners
 SC Integration Increase Customer Satisfaction.
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Span of integration
Defined in terms of proximity of firms within
the supply chain that is involved in their
integration effort to the focal firm:
Narrow Span of integration - Includes only a
firm and its immediate supply chain partners
Direct Supply Chain
Broad Span of integration - Include a focal
firm and firms beyond the immediate supply
chain partners
Extended Supply Chain
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Intensity of SC Integration
 This is the degree to which firms are internally and
externally integrated.
 Varies with Companies and Supply Chains
Frequency of interaction
Duration of integration
Obligations
Expectations
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Interactions/Communications
Shared Goals and Plans
Sharing of Burdens and Benefits
Performance Analysis
 Can Be Measured Using Various Indicators;
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Measures of Intensity of SC Integration
Frequency of
members
contact with other SC
Level of Effort in Pursuing integration;
Level of Participation
decisions of supplier
in
sourcing
Level of
Effort in developing trust
among SC Members
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 Information sharing
 Formal and informal information sharing with customers and
suppliers,
 Sharing confidential information and;
 Joint Determination of key factors for
satisfaction
improving customer
 Willingness to share the gains and savings from the
integration
 Integrating logistic activities and Broadening up the span of
integration
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Measures of the Intensity of SC Integration
Commonality Logistical
e.g. containers
Handling Equipment
Joint EDI Access/Networks
Management of Delivery Frequencies
Commonality of Used Third Party Logistics
Common performance measures
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Circumstances facilitating Supply Chain
Integration
 The Organization focuses in Suppliers and Customers
 The Organization depends and focuses in information flows
 The Organization focuses in Supply Chain Management
 Availability of Information sharing infrastructures
 Corporate Compatibility
 Management Philosophy and techniques
 Mutuality of commitment to relationship formation
 Symmetry on key factors such as relative size and financial
strength
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Some of the Barriers in achieving a
successful SC integration
 Misconception
and
miscommunication
between
partners
 Frustration about the required new roles and
relationships
 Fear for the Risk of Information misuse
 Inability to foster a collaborative culture across the
partner organizations
 Failure to follow suit when one of the partners changes
its scale or technology.
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