Integrated

Supply Chain
309 – Arpan Mehra
311 – Sunny Parekh
 Definition
 An Integrated Supply Chain (ISC) is one that has full
responsibility across the corporation (including different
divisions, business units and geographies) for the planning and
management of all activities involved in end-to-end supply
chain processes, including direct sourcing and procurement,
conversion/manufacturing, and all logistics management
activities.

(Source : Supply Chain Digest, The Logistics Institute – Georgia Tech)

 Reasons for ISC
 Manufacturer’s Goals
 Reduce costs
 Reduce duplication of effort
 Improve quality
 Reduce lead time
 Implement cost reduction
program
 Involve suppliers early
 Reduce time to market
 Supplier’s Goals
 Increase sales volume
 Increase customer loyalty
 Reduce cost
 Improve demand data
 Improve profitability
The 3 ‘V’s are the essence to good supply-chain
management
Better management of
variability results in an
Velocity improved, more efficient and
faster supply-chain

Visibility of these flows

Variability enhances the organization’s
ability to manage, control,
and affect change proactively

Visibility You can’t manage what you

don’t see: Up- and down-
stream visibility into product,
information and money flows

Improving visibility is the first step to better supply-chain management.

Steps In Integrated Supply Chain
 Integrated SCM usually begins with the
manufacturer integrating internal processes first.

 The company tries to integrate the external

suppliers.

 The last step is integrating the external

distributors.
 Vertical Integration
Vertical Integration Examples of Vertical Integration
Raw material
(suppliers) Iron ore Silicon Farming

Backward Steel
integration

Current Integrated
transformation Automobiles circuits Flour milling

Forward integration Distribution Circuit boards

systems

Finished goods Computers

(customers) Dealers Watches Baked goods
Calculators
 Keiretsu Network Strategy

• Japanese word for ‘affiliated chain’.

• System of mutual alliances and cross-ownership
– Company stock is held by allied firms
– Lowers need for short-term profits

• Links manufacturers, suppliers, distributors & lenders

– ‘Partnerships’ extend across entire supply chain
 Issues in an Integrated Supply
Chain
 Local optimization - focusing on local profit or cost
minimization based on limited knowledge
 Incentives (sales incentives, quantity discounts,
quotas, and promotions) - push merchandise prior
to sale
 Large lots - low unit cost but do not reflect sales
 Bullwhip effect - stable demand becomes lumpy
orders through the supply chain
Opportunities in an Integrated
Supply Chain
 Accurate “pull” data
 Lot size reduction
 Single stage control of replenishment
 Vendor managed inventory
 Postponement
 Opportunities in an Integrated
Supply Chain

 Channel assembly
 Drop shipping and special packaging
 Blanket orders
 Standardization
 Electronic ordering and funds transfer
Measures of integration

– Access to planning system

– Sharing production plans
– Joint EDI access / networks
– Knowledge of inventory levels
– Packaging customization
– Delivery frequencies
– Common logistical equipment / containers
– Common use of third-party logistics
Managing supply chain relationships
• How can broader-based relationships be formed
between trading partners in the supply chain?
Managing supply chain relationships

• Creating closer relationships

Arm’s length transaction Partnership

R&D Marketing R&D Marketing

Logistics Operations
Information Information
Logistics Operations
Information Information
system system
system system

supplier customer supplier customer

 Factors in forming supply chain
relationships
– The order winner

– The method making sourcing decisions

– The nature of electronic collaboration

– The attitude to capacity planning

– Price negotiations

– Managing product quality

– Managing research and development

– The level of pressure

 Efficient consumer response
How can collaboration be extended across the
supply chain to focus on meeting consumer
demand?
 Efficient consumer response
Category Establish Optimize Optimize Optimize
management infrastructure introductions assortments promotions

Product Integrated Synchronized Continuous Automated

replenishment suppliers production replenishment store ordering

Reliable
Cross-docking
operations

Enabling Item coding

EDI EFT and database ABC
technologies maintenance
 Efficient consumer response
• Enabling technologies
– Scanning data
– Data warehousing
– Data mining
• The data should include
– Demand / consumption / sales information
– Cash flow
– Stocks of finished goods / work in progress
– Delivery and output status
 Efficient consumer response
Category Continuous Enabling
management replenishment technologies
Account Joint inventory Effective
management management information
Demand Cross-dock sharing
management operations Automated

Multifunctional Continuous order

Required generation
selling teams replenishment
capability  Bar-coding
Price list Effective
restructuring logistics and and the use of
Effective and product flows other scanning
customized Quick response technology
promotions
 References
• White Paper on the Integrated Supply Chain – Aerospace
Industries Association
• Operations Management by R. Dan Reid & Nada R. Sanders
• Principles of Operations Management, 5e, and Operations
Management, 7e – Heizer /Render, Prentice Hall
• http://www.cessna.com/index.html
• http://www.ceeandgee.com/index.php - C & G International,
Inc.
• http://www.transportgistics.com/index.htm