Non integrated and integrated supply chain
What’s the difference?
The term supply chain may not be commonly known outside of the world of business but it is really quite simple. A supply chain is the sequence of processes involved in the production and distribution of a certain commodity. It’s simply split into two; downstream (activities that flow away from the source of production to the customer) and upstream (which is any activity that is performed prior to the specific point). As well as all of the division of up and down streaming, supply chains can also be integrated or non-integrated.
Integration is concerned with making the flow of information and material through the supply chain run smoothly. Better integration means better performance at each stage of the supply chain. Integration can be broken down into an internal and external form. Internal integration is making processes more efficient such as introducing the use of technology and external integration is how improving relationships outside of the company such as with suppliers or partners makes the system run more efficiently.
Push and pull factors of integrated and non-integrated supply chains describe the movement of the goods. Push is how products get from the supplier to the customer and pull factors are the actual customer demand and how information moves from the customer to the supplier so that the brand knows what the customers’ wants and needs are. Pull responds to a specific order where as push responds to a forecast made by the retailer. This means that pull factors have a quicker response but high advertising costs but push factors have a slower response and lower advertising costs.
Integration of supply chains can bring many advantages over non-integrated supply chains. As well as improving efficiency across the chain meaning lower costs, increased profit and reducing waste, it also helps the product speed to market meaning that the brand or company can stay ahead of the competition. With a non-integrated supply chain it would take longer for the product to reach the market because each division of the supply chain work as separate forms and therefore can run production at their own rate as they’re not relying on others for their product. To further this, integrated supply chains can also be extremely flexible, adjusting to the pull factor of the customer’s needs and negotiating better prices with the suppliers meaning an improved cash flow. Non-integrated supply chains would not be able to do this as freely due to the idea of each fragment of the chain working separately and therefore finding it harder to create direct links to suppliers without greater difficulty.
Many supply chains rely on technology to keep the running of their chains flow smoothly and efficiently. Companies need do this through Enterprise Resource Planning (ERP). ERP involves the planning of finance and accounting, human resources, manufacturing, supply chain management, project management and customer relationship management. This is usually all done through the investment of technology. This enables multiple networks to work together (head office, regional offices and remote/roaming users) so that information can flow between them and therefore allowing the each part of the supply chain to communicate which in turn allows for efficient operations.