Integrated Supply Chain: Introduction, Advantages & Disadvantages
Integrated supply chain is a process wherein every phase from procurement of raw materials to production, quality control to packaging, distribution or supply to eventual delivery is streamlined and inseparable. It is a holistic collective of the various processes, which may be under complete control of one company or multiple partners will come together to have collective control over the integrated process. Integrated supply chain or supply chain integration has several advantages which is why most companies have switched to integrated supply chain management. However, there are some disadvantages as well.
Increase in Revenue
Integrated supply chain allows a company to focus on assets that would allow the organization to reap more rewards. There are always facets of a business that will have a more pronounced impact on the revenues and hence must be optimized as much as possible. Integrated supply chain management allows companies to prioritize and focus on the specialized assets that would improve their products, increase market share or enhance operating profits.
Integrated supply chain will always reduce costs, especially transactional costs which are unavoidable among subsidiaries, partners or vendors. Having a centralized or integrated supply chain management, a company is essentially doing away with frills that would have otherwise delayed the process and would have also incurred needless costs.
Supply chain integration helps in ensuring quality. When there is a concerted attempt to keep a stringent compliance check, it is immensely difficult to approve or pass along faulty products. There is only one authority overseeing compliance throughout the process.
With financial advantages, stricter compliance and better products, a company will be able to fight its competition and emerge as the winner with integrated supply chain management.
DIS-ADVANTAGES OF INTEGRATED SUPPLY CHAIN
Integrating all suppliers will pose challenges to a business trying to manage every internal and external supply. Not every supplier needs to comply with every regulation or norm. A company trying to have a generic approach which will be the case with integration supply chain management will needlessly compel all its suppliers to adhere to the same standards.
Integrated supply chain management can easily lead to a complicated scenario where resources are shared and unnecessarily wasted. Not every supplier needs every system. Every supplier and department needs to operate according to its own strengths while overcoming its witnesses.
Dearth of Compliant Suppliers/Vendors
There can be a shortage of suppliers or vendors that would choose not to renew contracts if the terms of supply chain integration don’t suit their business priorities. This can have an impact on the procurement and supply costs as those willing to comply with the new norms may have a steeper rate.
Vulnerable to System Collapse
There can be a collapse in the checks and balances if there is any lapse in the inspections or compliance checks. An integrated supply chain means one error somewhere can bring the whole system down.
It eventually boils down to how a company manages to extract the benefits and overcome the challenges or avert the complications. Should supply chain integration be effective and efficient, a company can reap long term multifaceted rewards. Students at AIMS develop these and many other SCM and logistics skills, during studying logistics courses, supply chain management certification online, supply chain management diploma online and supply chain management degree online programs.