Tight integration provides companies with insight not only into their own operations but in their suppliers operations. With the insight applied it leads the way to collaborations on reducing costs and driving margins.
Tight integration supply chains can serve as a buffer zone system, this would be used to let the customers know about the supplier experience cash flow problems quicker enabling them to find an alternative arrangements. Sometimes the company steps in and loan the suppliers a capital just so that they can continue to operate.
Three types of integration.
The first type of integration is where the company make a written agreement with other facility whether it is raw materials, manufacturer, supplier or retailer. This written agreement will be a set agreement over a period of time, for example if a company needed this amount of components for the final product then the raw materials department will produce a certain amount and get paid the same amount each time.
The second Type of integration is when the facility moves closer to the location of the company. For example if raw materials signed a written contract stating that they will be producing components for a specific amount of time. Companies now make it easier for them to communicate and be on the same page, by building a shared production software, which then enables them to see how many components the company needs and on time for the company to meet their goal.
The third type of integration is vertical integration; this is when the company bought over the facility. Again to use raw materials as an example the company purchases the facility so that
they won’t have to go far for that certain vendor. This seems to be the most used for of integration do to the fact that the goals are met a lot faster. The companies that use this method manage to get their product out first, which leaves them with all the other competitors rushing to get their product out.
Internal Integration & External Integration. Internal integration is how the process is going on within the company also how it can be made more efficient. This will benefit the company. External integration is how the external relationships be improved, for example partners or suppliers outside of the company or brand.
An example of companies practicing integration is with DHL’s collaboration with WH Smith and Primark. DHL made it easier for the customers to access a service point. DHL service points are in 350 high street stores making it easier and more efficient for the customers that thing DHL as a company is reliable to use it. The reason why I mention WH Smith is because they have a really big service point there in the high street store. They also have service stores in Ryman; Access self-storage, Safe store and Staples. Another example is Primark; DHL has a long standing relationship with Primark. So when there was news that there was a fashion line for Primark happening in Germany DHL opened a new logistics store in Germany. DHL have had offers to customise logistic solutions across national borders. This meant that DHL build more logistic centres closer the locations and had to arrange transportation to and from Germany.
(These are two examples of external integration).