Creating value from supply chain integration

Creating value from supply chain integration
A truly integrated supply chain not only reduces costs, but also creates value for the company, its supply chain partners and stockholders. The basis of integration is information sharing. Integration requires various collaborations. Then there are organizational relationships that achieve shared risks, costs, and shared benefits. Industry leaders tell us the truth: the rewards of successful supply chain integration are truly enormous.

During the Asian financial crisis, a shining star appeared in the eyes of investors, as it posted record sales that surprised the industry. Seven-Eleven, a major domestic retail chain, has been so successful that its stock value has surpassed that of Wall Street darling, DELL Computer, in recent years. Of course, DELL is a miracle, its sales, profit income, stock price and even shoulders are far higher than its competitors in a brutally competitive and saturated market.

Interestingly, among the most innovative companies in supply chain management, Seven-Eleven of Japan and Dell Computer of the United States are the two most representative companies. Both companies use creative new ways to operate their supply chains, define new rules of the game, and maintain supply chain performance as part of their strategic competitive strategies. They are leaders in successfully integrating supply chains.

Japan's Seven-Eleven and Dell Computer are successful supply chain integration successes with impressive results. Cost reduction is an established aspirational expectation, but not the only one. Supply chain integration can also generate profits, increase market share, strengthen competitive position and enhance company value.

All of these can be seen at Lanxun Technology. Two years ago, the company revised the company's supply chain strategy in Asia, adjusted the mission of the company's production base in Asia, established contacts with local suppliers, and redesigned products and processes to support supply chain management. Shortly after that, Taiwanese authorities made adjustments to the telecommunications industry, opening up the telecommunications equipment market to the world. Lanxun has achieved incredible results in winning 100% market share of switching systems in Taiwan, all thanks to the company's new supply chain strategy.

Global corporations like Lanxun Technology, Walmart, P&G and Sun Microsystems have shown the world that value can be created through supply chain integration. But small and mid-sized companies can also reap that value. Sport Obermeyer Corporation. For example, the tight integration of the company's overseas production base with its customers and retailers has resulted in a 60% increase in profits while the company has been ranked first in market customer satisfaction surveys for several consecutive years. National Bicycle Corporation, a Japanese bicycle manufacturer Manufacturers, applying innovative supply chain strategies to create new products and penetrate untouchable market areas in the industry, have seen the company's market share double in a few years.

The success of these companies is the result of supply chain integration, the clever use of information to revolutionize transactions in the supply chain process. Their supply chain is not static, but evolves synchronously based on changing market and customer needs.

Companies in the semiconductor, natural resources, processing, telecommunications, consumer goods and services industries find similar value in information agile supply chains. No wonder like Xilinx, Hewlett-Packard and
Senior leaders of innovative companies like Quantum consistently make supply chain management their top priority when planning their overall corporate strategy.

Today's Supply Chain Environment

Supply chain management involves logistics, information and financial formation of such a network of customers, suppliers, and manufacturers. Logistics includes the flow of products from suppliers to customers through the supply chain, and also includes the same type of flow through product returns, repair services, recycling, etc. The flow of information involves order routing and delivery status. Financial flows include credit terms, payable plans, delegation and naming rights processing, etc. All of these flows involve multiple functions and areas within a company or between companies (or industries). Collaboration and integration of these flows within or between companies is critical to effective supply chain management.

Effectively managing these flows is a headache, especially for those global companies. For an international multinational company, the supply chain of products or maintenance services can be complex. A global company's supply chain now typically consists of multiple businesses located around the world. Moreover, every business has access to a variety of supply chains such as order fulfillment, international sourcing, acquisition of new information technology, and customer service. It is also possible to design more complex relationships such as multiple suppliers to multiple customers, or a supplier may be a customer or even a competitor at different stages of the supply chain process. It is because of this complexity that some refer to supply chains as "supply networks."

Because of the complexity of the web, the communication between groups and the accuracy and punctuality of information transmission are complicated. Moreover, the multi-layered nature of the supply chain can distort demand information. Distorted information can lead to excess inventory, idle production capacity, high manufacturing and transportation costs, and increased customer dissatisfaction. An efficient supply chain requires information to be accurate and timely. The more complex the supply chain, the higher the requirements.

In today's environment, customers will not tolerate poor customer service and demand more customized products and services. Since your competitors are constantly launching new services according to the characteristics of different regions of the market, your company must also provide similar services or even higher quality and more personalized services accordingly. Following this, products are becoming more and more diverse due to differences in countries, customers and sales methods: all these make market forecasting, inventory management, production planning, after-sales support much more difficult.

Finally, product life cycles are getting shorter and shorter. The expected life cycle of high-tech products such as personal computers is now only 9 to 12 months. In addition, technology updates are getting faster and faster, and product updates are getting faster and faster. The result is a significant increase in the variety of products offered by the company due to the repetition of the life cycle of the serial products. So the success of the company and the production line depends to a large extent on the efficient management of the supply chain of the introduction of new products and the elimination of old products.

Components of the supply chain

Efficiently managing ever-increasing customer requirements and product supply in complex global supply chain processes requires tighter integration of partners. So what exactly does the supply chain consist of? Main factors: information integration, cooperation and organizational relationships.

Information integration refers to the sharing of information and knowledge among supply chain members. They share demand information, inventory status, capacity plans, production plans, promotion plans, demand forecasts, and delivery plans. Members also participate in collaborative forecasting and replenishment.

Collaboration refers to the redeployment of decision-making authority, job responsibilities, and resources to members in the best positions in the supply chain. Example to explain: A company used to make supplementary plans by itself, but now chooses to give up this decision-making power and let the supplier perform this decision-making power on its behalf. This decision-making authority is more appropriate because the supplier's knowledge and technical advantages of the product, the overall market, and forecasting techniques. This is the basis of programs like VMI (Vendor Managed Inventory) and CRP (Continuity Replenishment Program).

Companies may also shift some of the actual work they are doing in order to improve the efficiency of the entire supply chain. The assembly of personal computers is an example. PC makers now allow distributors to be responsible for final product construction and testing for customers, work previously owned by the manufacturer. Finally, resources can also be redeployed, pooled or shared so that everyone in the supply chain can benefit from it. Shared warehouses, inventory centers, and supplier centers are examples of this.

Integration is not complete if it does not involve forming closer organizational relationships between companies. Supply chain partners need to identify and maintain the channels through which they communicate with each other, whether these channels are EDI (Electronic Data Interchange), Internet exchanges, reporting groups or executive programs. The performance measurement of supply chain members should also be quantified, integrated and monitored. In this way, one supply chain member may be responsible for evaluating the performance of another. Performance assessments may also be jointly conducted by multiple organizations. Such an extended approach to performance assessment encourages closer collaboration and collaboration. Finally, if the motivations of the members of the supply chain are aligned, then the various organizations in the supply chain can work more closely together for a common goal. Keeping the motivation consistent requires mechanisms such as shared risk-taking and equal shared benefits.

The integration of supply chains that incorporate elements of information, collaboration, and organization has enabled the resulting networks to continue to be successful. On the basis of successful integration, the responsibilities of the members of the supply chain will vary with customer requirements.
change as desired. The risks and costs caused by members entering or exiting this chain are minimized. This evolving network can lead to greater efficiency and greater accountability.

Information sharing is the foundation

Information integration is the foundation for broader supply chain integration. For companies involved in collaborative inventory management, information sharing and financial flow management, it is imperative that they have access to information that reflects how their real supply chain is performing at all times. If you can't share information, you can't expect to get a big return from integrating your entire supply chain.

The first level of integration is to achieve demand-driven information sharing in the supply chain. In fact, some people like to call supply chain management "demand chain management" to emphasize that all activities in the supply chain are based on the actual needs of customers. The customer order is the source that ultimately drives all the actions that follow in the supply chain.

Information sharing is the most effective way to address the well-known problem of demand distortion in supply chains known as the "long whip effect".

Likewise, an upstream site can share information on inventory levels, production capacity, and delivery schedules with its downstream sites. This allows downstream partners to clearly understand the supplier's supply situation, reducing their tendency to "gamble". So suppliers can share not only their own information about inventory and production capacity, but also their suppliers' data. All information in the supply chain is transparent.

The next level of information integration refers to the exchange of knowledge among supply chain partners. It's a deeper relationship. This requires a deeper level of trust between partners rather than simple data sharing.

Knowledge exchange is the basis for a collaboration between Wal-Mart and Warner-Lambert to forecast and complement the pharmaceutical and nutraceutical market. Large retailers such as Wal-Mart can clearly understand local customer preferences through communication with customers and data analysis of their various points of sale. Pharmaceutical companies understand the properties of their drugs and can use various external data such as weather forecasts to help plan demand trends. Both parties can contribute their knowledge to share and work closely together to determine the right market replenishment plan.

Similarly, Seven-Japan Corporation of Japan has created many new and more customized products by fully cooperating with its various suppliers and shopping malls. Companies are able to quickly replenish malls, meeting the individual needs of many different customers in different locations and at different times of the day or week. This level of customization (almost like a one-to-one marketing strategy) greatly enhances customer relationships. In fact, this is the key factor behind the success of Seven-Eleven in Japan.

Another successful example of knowledge sharing is the Collaborative Program Predictive Gas Replenishment (CPFR). CPFR is a first for the grocery industry. The exchange of market and product knowledge helps retailers and manufacturers develop the best merchandising plans and the best new product launch plans. In some cases, CPFR could even bring retailers and manufacturers together to design new products.

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