Supply chain integration is defined as close alignment and coordination within a supply chain. According to the study The Impact of Supply Chain Integration on Performance: Evidence from the UK Food Sector, supply chain integration (SCI) provides numerous benefits such as reduced total costs of logistics, which then leads to the organization being more profitable.
Some barriers that often hinder companies from integrating their supply chain include:
- Lack of trust among firms
- Conflicting goals – firms have different objectives and goals they are trying to achieve and sometimes it can be difficult to align processes between firms
- Unique culture
This study shows that integrating the supply is beneficial for the company and can be successful through proper transparent information sharing, including with customers. Although this study was done in the food industry, there is evidence that it can be successful in many other industries/sectors. However, too much integration can be a (sometimes) problematic strategy. Having heavy integration can be a barrier to having a dynamic and flexible supply chain. To combat this, companies need to try to predict and then get rid of potential issues with strong integration.
According to Challenges of Supply Chain Management in Brazil, if a supply chain is not integrated and managed, significant resources can be wasted. Research shows that improved integration leads to a stronger performance for the supply chain as a whole; the broadest integrations brought the highest performance.
One challenge of this between domestic and international markets is infrastructure; different countries have different levels of infrastructure. A lack of infrastructure and/or technology can be very problematic and be a huge barrier to integrating a supply chain. The sharing of information is vital in integrating a supply chain. If a US company is getting a part for car or some ingredient for food from a low-income, underdeveloped country with little technology, they are unable to communicate, thus, having an unsuccessful supply chain integration (or at least an integrated supply chain without that part).
Brazil, for example, has relatively poor infrastructure. The U.S. exports a lot of products to Brazil as its economy recovery and there is a consumer demand for higher-value products. The U.S. exports beef, organic products, and alcoholic beverages.
As talked about in my international marketing course, it is important to establish good relationships with suppliers and customers in markets you’re going into. If a company establishes a presence in a foreign country via joint ventures (the safest bet for most companies entering a foreign market), that company can and probably will use some of the partner’s resources and knowledge. Therefore, it is important to have transparency and shared information within your partners and supply chain to be successful. Also discussed with this, is that logistics is the largest single operating cost. Integrating your supply chain, as The Impact of Supply Chain Integration on Performance: Evidence from the UK Food Sector explained, can reduce logistics costs. A company decreasing its single greatest operating cost would be incredibly beneficial in the long-term by saving money and time.
How important and difficult do you think supply chain integration when a company has various parts of their supply chain in two or more countries?