There are two different types of integration, internal and external. Internal integration is how the processes within a brand can be made more efficient,within this process new technologies are often applied. Then there is external integration which is how the external relationships can be improved, this involves processes outside of the initial retailers and involves partners further extended from just the company/brand.
Integration is concerned with improved co-ordination so that information and flow works efficiently throughout the supply chain. Improved integration leads to improved performance for every stage, which is a key goal for all retailers; although integrating chains is not easy to achieve.
Integrating activities both within and beyond organisational boundaries have become, and will continue even more in the near future, to be a major challenge for supply chain executives.
Integration efforts now extend beyond traditional product-process design and functional integration, to now focus on extra-organisational links with customers and suppliers. The objective of many retailers now is to produce "supply chain-enhanced" products and services.
Non integrated companies commonly have a disconnected flow of product and information, as well as limited ability to react to customer requests, unpredictable product delivery rate, limited visibility on shipment information and performance based on functional activities. With an integrated supply chain, firms gain more of a customer service focus. They also reduce waste and become faster and more flexible, while maintaining the highest of quality standards. Overall, they are gaining advantage to their competitors, and are able to keep implementing continuous improvements to stay in that position, these are improvement that all retailers strive towards but are not always able to achieve.
As well as not being easy to achieve, in retrospect, integration is also not suitable or realistic for all retailers. Integration is often not suitable for smaller/independent retailers. The size of an organisation is a key factor as to whether or not integration is achievable.Integration is an expensive process so many smaller, independent retailers are unable to afford this as they are not developed enough to have accumulated the essential money which is needed for investment. When beginning the integration process it is very important to weigh out whether or not the cost of change, investments involved and the progression of IT and human resources outweigh the long term benefits that the retailer would be gaining. Integration would be unsuccessful and fail if the cost exceeds the potential savings and benefits. For smaller retailers an integrated supply chain is not essential. Although the benefits may sound idealistic to them, their supply chain is far more simplistic and there are ways in which they can go about achieving some of these benefits in a different way, which would be much more cost effective and less of a risk for them.
Integration relies on several organisations being willing to integrate. For the process to even begin a retailer must find others whom are willing to integrate with them, this is not always an easy process. When trying to integrate, as a retailer, you must persuade others and make sure they are going participate in the sharing of vital information and are also going to be reliable. If there is a lack of transparency and trust then the integration will fail;it is also important to understand whether or not the companies have the same goals as you before agreeing to the integration. The sharing of information is most relevant in the case of external integration where the sharing of information outside of the retailer takes place, you must share information that is personal to your company as well as sharing your goals and risks. Sharing this sensitive information can make a retailer vulnerable to competitors. This is another reason that smaller retailers find it a much more difficult process to integrate, the risk of sharing information and being vulnerable to competitors is far greater as they as less established and complex, it would take less for their company to fail than it would for large companies. Many smaller retailers rely on differentiating themselves from large retailers for the success of their company, therefore by sharing this private information they could potentially be putting their whole company under threat, which is too much of a risk to even consider. Others may also not be as willing to collaborate with smaller retailers than they would be to collaborate with bigger, more well known retailers. Bigger retailers are more reliable to integrate with as they are more likely to have more money to invest which lowers the risk of a case to reject or any failure to integrate, they are more established. By being more established, these retailers also have more reliable and continuous sales. They are more well known and will have developed far more relationships with customers, who are constantly returning to stores and increasing the demand of products more and more. For other retailers which they may choose integrate with, this factor lowers the threat of being out of work or any problems within the integrated supply chain due to any fall in sales or the fail of the business.
For retailers, integration sounds somewhat idealistic with the many benefits it has on offer. Of course overall it improves efficiency across the supply chain which is of course the main goal for any retailer, although this is the main benefit there are also many others. By working as a team it allows retailers to stay ahead of the competition through the means of the increased speed to the market time and this allows them to adjust to customer demands quicker, it also allows retailers to adjust to customer demand, improve product availability, reduce stock holding, improve cash flow and also allows staff to focus on strategic goals rather than functional ones which helps with future, long term stability.
For integration to be successful you must integrate with a reliable source as once integration takes place a retailer becomes very dependant on others, they become dependant on once source for production which causes possible complacency and opens a door for possible fraudulent activities. Clearly fraudulent activity is something that retailers are keen to avoid, this is another example of how integration with the wrong other organisation can lead to vulnerability for the retailer. With the companies that a retailer integrates with it is important to have strong reliability and communication. A breakdown in communication can lead to complete disaster and breakdown in the efficiency of the supply chain, if there is a lack of communication then parts one of the supply chain will be unsure about instructions and what is going on, which can only lead to one large catastrophe. Also communication is important to avoid any language barriers or cultural differences, these are all factors that will lead to a smooth flowing supply chain.