SCM Integration 101: Benefits, Essential Integration System Types, and More
By itself, supply chain management (SCM) is the efficient management of the procurement of raw materials in a timely, cost-effective manner. Modern information systems are used to oversee the various complexities of vendor engagement, inventory management, shipping logistics, and needs analytics in order to transform raw materials into final products for the end-user.
As business needs evolve, however, we’ve seen that the supply chain impacts much more than just the assembly line. SCM integration is a holistic business strategy that acknowledges that many business processes need to be in a closer working relationship, so that responsiveness, workflow, and even customer relationship management can become part of the decision-making process. The purpose is to maximize efficiency, profitability, and customer satisfaction. This article serves as a primer course on SCM integration and presents its benefits, essential integration system types, and more.
What Is a Supply Chain Management Integration?
As the world works to move past pandemic-related supply chain obstacles, international tensions and inflationary pressures present new challenges to SCM professionals. In fact, the Global Supply Chain Pressure Index (GSCPI) for April 2022 suggests a slight worsening of conditions as global strains continue to test procurement providers. According to KPMG, the six key trends impacting global supply chain management in 2022 include:
- Logistics disruptions
- Production delays
- Over-reliance on a limited number of third parties
- Doubling down on the technology investment
- Commodity pricing
- Workforce and labor
Responding to these factors in real time requires advanced supply chain competencies. SCM integration coordinates the flow of information through all steps of the production process into a single system. It may begin with horizontal integration that connects all departments within a company. Vertical integration then expands the capabilities to include vendors, suppliers, and customers. We can see an example of integration in the partnership between P&G brands and retailer Walmart. The partners integrated information systems, so P&G products were on store shelves as needed, without over-supplying each store.
Integration connects supplier, manufacturer, distributor/retailer, and end-user so all elements of the continuum work closely together. Computer manufacturer, Dell, provides a different example of vertical integration by relying on partners such as Microsoft to meet software needs. At the same time, the company focuses on its core competency of providing made-to-order hardware directly to customers. Dell uses this strategy to maintain a low-cost inventory and continue to provide consumers with just-in-time delivery.
A successful supply chain integration works on principles of mutually beneficial goals, open communication, positive collaboration, and shared technology. It requires significant coordination to accurately forecast customer demand and ensure sufficient lead time. This is so that parts and materials are available at the manufacturing facility when required, personnel and equipment are available for the production runs, and transportation components are procured to deliver the product to the customer at the exact time of need. Supply chain integration management brings all parties together to streamline the logistics and distribution activities using standardized management tools.
Key Benefits of SCM Integration
Supply chain management integration is a business strategy that links tools and process flows together in a way that is in sync in real time. The key benefits of SCM integration include:
Better Customer Experience
Instead of being disconnected, the integrated supply chain brings customers into the supply chain process, so they can clearly view all activities and production processes related to their orders in real time. They can inform suppliers of their requirements and timeframes and view forecasts to determine when products will be completed, shipped, and received.
Bring Products to Market Quicker
SCM integration provides increased insights into supply chain activities, so producers can better balance supply and demand. SCM software delivers market overviews, enabling users to spot new opportunities, pivot production strategies, and shorten the production lifecycle while swiftly responding to emerging markets, fluctuating economic priorities, and changes in demand.
Reduces the Total Supply Chain Cost
As part of a lean production strategy, SCM integration allows producers to eliminate supply chain waste and lower cost requirements by responding more effectively to market and customer unpredictability.
Provides In-Depth, Cohesive Data
Unlike outdated models where each department or entity is siloed, SCM integrations feature centralized data systems. This is so that various participants in the supply chain process all work with the same information. Real-time updates are quickly and easily supplied to all suppliers, affected customers, and internal supply chain management professionals. Plant managers and supervisors use the centralized data to pinpoint areas of inefficiency, improve production processes and shorten delivery time.
Enables Accurate Financial Tracking
With inflation rising and concerns about a recession growing, it is critical to track key metrics accurately and control every dollar spent. SCM integration provides financial management team members with ongoing, real-time data to identify areas of inefficiency and wastefulness, thereby maximizing resource management.
Essential Systems Types That Businesses Can Integrate in a SCM
Effective SCM integration allows various entities to share data and make more informed decisions throughout the supply value chain. Essential systems types that businesses can integrate include:
Enterprise Resource Planning (ERP)
An ERP system is critical to supply chain management to ensure that manufacturers can quickly respond to market fluctuations. An ERP looks at the entire organization to provide a holistic view of complete business operations and identify areas for supply chain improvement.
Reasons for ERP Integration
- More efficient management of demand and procurement needs
- Improved documentation processing
- Increased operational visibility
Warehouse Management Systems (WMS)
This software solution integration provides increased visibility into the entire inventory and warehouse system — from receiving to shipping — to control operations from the manufacturing center to the end user.
Reasons for WMS Integration
- Better match supply with demand
- Manage supplies and inventory more efficiently, keeping them at optimum levels without incurring unnecessary costs
Financial systems include operational data, logistical expenses, and inventory measurements. Including these elements in the supply value chain provides a clearer picture of claims, costs, and revenue information.
Reasons for Financial Systems Integration
- Tighter financial control
- Accurate budget forecasts
- Reduced overhead costs
Customer Relationship Management (CRM)
Perhaps the best application of SCM is to create a seamless interface with customers.
Reasons for CRM Integration
- Highlight current customer needs
- Support detailed inventory projections
- Increased customer satisfaction
Business Intelligence (BI)
As conditions evolve and change rapidly, managers and decision-makers need up-to-date business intelligence information.
Reasons for BI Integration
- Predict market patterns and trends
- Customer demand management
- Adaptation to IoT (Internet of Things) smart technologies
Common Obstacles of Supply Chain Integrations (With Solutions)
Although the benefits of SCM integration are numerous, there isn’t one given template for successful integration. Below are some potential obstacles to be aware of before beginning this process, along with suggested solutions.
Lack of System Knowledge
It can be challenging enough to integrate supply chain management within one organization, let alone expand it to outside entities unfamiliar with the system. Users with inadequate knowledge can place roadblocks to progress.
The key is to create buy-in from the very beginning. Help all parties understand the benefits and form strong relationships during the integration process. In-depth education and constant information-sharing are imperative to building system knowledge.
Missing or Inconsistent Data
Since data forms the foundation of integration, organizations must use the same data across the system to prevent cracks in the foundation. One department might not share the latest data with others, or some supply chain entities may use different versions of the SCM software.
All systems within the supply chain must act on the same data set. Invest time before integration to identify disparities and account for varying logic approaches to successfully bring all entities under the same SCM umbrella.
Not Having an Effective Planning and Risk Management Schedule
Risk management in supply chain integration seeks to identify and prevent pitfalls that are not yet readily apparent. This was demonstrated by the inability to forecast and manage pandemic-related supply chain disruptions.
There should be a coordinated, consistent, collaborative understanding of risk among all supply chain members. Use data to identify areas of possible concern, send notifications to potentially-impacted members, and develop reaction strategies before reality makes corrective action impossible.
Managing Expectations With Suppliers and Partners
SCM integration is a valuable management tool, but it’s not a magic solution to supply chain issues. Some suppliers and partners may think just signing on to use the system will solve their problems, but it takes more dedication and understanding.
Be upfront with suppliers and partners about what SCM integration can achieve. Understand what they would like an efficient SCM system to accomplish, and provide education as to whether those goals are realistic — and what is required on their part to achieve them.
Integrate Your SCM Seamlessly With Anvyl
Anvyl is a production management software that allows supply chain leaders to centralize their data, automate processes, and facilitate collaboration. We have extensive experience in helping companies better manage their supply chains.
Take control of your production process when you centralize data, automate processes, and facilitate collaboration across your supply chain with Anvyl. Contact us today to schedule a demo or learn more about how Anvyl can help your company seamlessly integrate your SCM.
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