Integration is concerned with improved co-ordination in the supply chain. In simpler terms, integration is how a company collects materials, produce products and furthermore dispatches them to their consumers in the most efficient and cheapest way. Better coordination within the supply chain consequents in materials and information flows working more efficiently. Improved integration leads to an improved performance at every stage of the supply chain.
There are two types of integration:
Internal: Internal integration is all to do with how the processes within the brand or company can be more efficient.
External: External integration is how the relationships outside of the brand or company can be improved (with partners and suppliers).
Internal integration uses a large aspect of technology as it is important to prevent errors and make it more efficient.
External integration requires THE THREE C’s:
Co-operation, Co-ordination and Collaboration. The three c’s make the company or brand require a small number of suppliers and furthermore trust with the suppliers as they need to share confidential information and lastly as little distance from the supplier as representatives may need to travel there rapidly to resolve implications.
Integration helps in reducing waste in a supply chain. Waste can be caused through various things. The most known seven are: overproduction, holding products in the inventory, wasting time by waiting for resources, the motion of production, how the product is transported, improvement and rework and over processing information. If all these wastes are reduced the supply chain and production will benefit the company’s performance.
THE THREE A’s OF INTEGRATION: Agility, Adaptable, Aligned. Agility is the ability to respond quickly to sudden changes that are in high supply or demand. The company or brand need to be able to deal with unexpected situations calmly. They may choose to create crisis plans to have precautions in place for when crisis’ occur.
A company/brand needs to be adaptable to evolve their image and products as the economy progresses, politics
change and influences fashion, their target market ages and technology advances. If they are not flexible to
adapt around these changes they will not keep in trend and the demand for their products will decrease.
Alignment is crucial for a company or brand as they need to be able to exchange information and knowledge with their suppliers and consumers.
A company or brand can either be integrated of non-integrated. An integrated supply chain uses the resources and control from one business to design, manufacture and transport their products. A company that uses an integrated supply chain is Zara. Zara makes all their own stock, sourcing and manufacturing from one location leading them to have a shorter lead time. Larger companies tend to use integrated supply chains as it builds relationships with other businesses and it is a fast process between designing the product and then being able to purchase it.
A non-integrated supply chain source products from multiple businesses and places. Smaller companies and boutiques are more likely to use no integrated supply chains. Their lead times are longer due to them sourcing from multiple different places which is more time consuming. This means they are not in competition with other retailers as they are slower to get the products onto the shop floor.
There is advantages and disadvantages of both.
Advantages of Integration are:
•Easier negotiation with suppliers.
•Adjust quickly with advances in technology.
•Flexibility.
•Improved efficiency across the supply chain.
Reduce waste.
•Quick from production to the market.
•Reduce stock holding.
Disadvantages of Integration are:
•Outsourcing to foreign countries to lower labour cost can cause controversy in media.
•Difficult and time consuming to integrate supply chains.
•Power must be evenly distributed throughout the chain so all businesses are benefited.
Advantages of non-integration:
•Cheap and cost effective.
•Easy to manage.
•No reliance on one business for income.
Disadvantages of non-integration:
•Less communication throughout each stage of the supply chain.
Long lead time.
•Struggle to compete with competitors as products are reaching the market slower.
•Less flexible.
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iNTERGRATION. wHAT IS IT?