What is supply chain integration? For people not involved in the supply chain industry, this may be a vague phrase. While some have encountered this while browsing the internet, many are still oblivious about its value. If you are one of those individuals unaware of the meaning of the supply chain integration, keep reading this blog to find out its definition. If you already know it, read on as well to know how to explain it in simple terms to others who don’t.
To fully understand the phrase, let us first define supply chain and integration. Supply chain refers to a system of resources, information, activities, people and organizations involved in moving a product or service from the supplier to the customer. It is the change of natural resources and raw materials into the finished product, which is delivered to the customer. Integration, on the other hand, is simply the act of combining into an integral whole.
Putting them together, supply chain integration simply refers to the association and collaboration of suppliers, customers and trading partners within the supply chain. It is the coordination of information, material and financial flows between and among the involved parties. It benefits all participants if done effectively and monitored carefully. What do you need to have effective supply chain integration?
Supply chain integration requires the total commitment of the upper management and communication among involved parties. The relationship and commitment should be strong enough to ensure that a company has the raw materials to produce outputs. For instance, a computer company must select specific vendors to supply motherboards and sign a contract, which will require it to deliver a specific quantity at a definite time.
To maximize the effectiveness of the supply chain integration, the infrastructures of companies should be linked. The computer system of the seller should allow the buyer to track the status of the order and updates should be provided to the buyer. When the product is ready for delivery, the transport agency should appraise both the buyer and seller of the shipment status.