Supply Chain Integration
August 03, 2010
In discussions about business processes, including supply chain operations, I have noted that the presence of organizational silos can create challenges that make businesses less efficient and less effective. Greg Brady, founder, CEO, and Head of Research and Development at One Network Enterprises, continues to see silos within company supply chains and he believes it’s high time that companies begin serious integration efforts [“Guest Commentary: Create a Truly Integrated Logistics Operation,” Logistics Viewpoints, 1 July 2010]. He writes:
“I am constantly amazed at the number of companies today that procure and manufacture both globally and domestically, yet use multiple logistics solutions that plan and execute locally. For example, I talked recently to several Fortune 500 supply chain executives interested in improving their supply chain and identified a common theme – each ran their international, domestic inbound, and domestic outbound logistics as independent business silos, using separate IT solutions and reporting structures. My immediate response to these companies – or any company seeking a truly ‘demand-driven’ supply chain – is to adopt a single system of record for planning, executing, and sharing information across their international and domestic supply chain.”
Lora Cecere, another supply chain expert, goes even further than Brady by claiming that integrated demand driven supply chains are not even sufficient to meet the needs of customers [“Demand Driven is Not Sufficient,” Supply Chain Shaman, 18 June 2010]. She writes:
“I do not believe that Demand Driven is the end state. I believe that it is the most effective means to an end. … The research supports that demand-driven value chains based on outside-in design enables the most effective response with the least amount of waste. However, it is not sufficient. The market is upping the ante. The right product, right time, right place is not sufficient. The move is to value-based outcomes with demand-driven as a means to an end.”
You cannot achieve real value unless you have an integrated picture of the entire supply chain and an integrated way of meeting demand once it is sensed. Brady continues:
“To begin with, it is impossible for a company to gain a true picture of supply and demand across three separate parts of the logistics environment (international, inbound domestic, and outbound domestic). The process of gathering and interpreting data takes valuable time and affords no window of opportunity for procurement or manufacturing to resolve issues as they arise. Users are required to piece together a complex puzzle to understand all the different legs of the shipments and to identify where their shipment currently resides. Without this information, procurement and manufacturing are at the mercy of logistics to figure out where their inventory is located when issues arise. This means that by the time the shipment is located, it is too late to perform any action to resolve the issue. Technology solutions were limited in the past and often forced companies to select three different solutions. However, with the advent of cloud computing and multi-party solutions, technology solutions can now provide an integrated picture across international, inbound, and outbound logistics.”
As an example, Brady turns to a challenge that plagues most international manufactures — product not available scenarios. He continues:
“Take, for example, an order placed at an international manufacturing location. By the time the order is shipped and arrives at the domestic port, we can review demand to determine if the point the shipment was originally destined still needs the inventory. If the demand has changed and the inventory is no longer required, we can immediately intervene to re-allocate the inventory to another location based on supply and demand.”
Without an integrated system, such orders arrive at ports and are offloaded before it is discovered that the inventory is needed elsewhere. The result is delayed order satisfaction, order deductions, unhappy customers, increased costs, etc. Enterra Solutions is working on system that will alleviate these kinds of logistics problems. Brady concludes:
“Finally, I see more and more domestic manufacturing companies that are missing tremendous opportunities by not integrating inbound and outbound logistics operations and systems. … I would like to challenge all supply chain executives to investigate integrating domestic inbound and outbound logistics operations as well as their international operations. It’s a viable solution today given the advancements in technology like Cloud Computing and Multi-Enterprise architectures.
Here are a few suggestions on how to get started today:
- Connect your international and domestic operations together by creating a common backbone that can create a planning, execution and visibility layer between your international and domestic operations.
- Begin researching putting your inbound and outbound logistics on the same solution so you can take advantage of inbound and outbound synergistic flows and reduce your carbon footprint, lower your inventory levels and reduce your transportation spend.
- Streamline logistics reporting structures so international and domestic operations report to the same executive.
- Identify opportunities to integrate your replenishment process with your logistics operations so your supply chain can become a competitive differentiator.
In my opinion, this represents a strategic opportunity that will place you well ahead of the competition.”
Brady’s comments are in line with what has been called “the new supply chain agenda.” According to Supply Chain Digest, this new agenda calls for “better alignment of the supply chain with overall corporate strategy, and more specifically finding and driving the metrics that truly improve shareholder value” [“The New Supply Chain Agenda,” by Dan Gilmore, 24 June 2010]. I have been preaching about the virtues of corporate integration since founding Enterra Solutions. However, integration is always easier to talk about than to achieve. Only now are technologies being developed that can help create integrated, user-friendly systems that can benefit all stakeholders in the supply chain. Like Brady asserts, companies that take advantage of these technologies are going to have a competitive edge in the future.