To keep up with shrinking margins, increased competition, and dwindling brand differentiation, a growing number of businesses are integrating their supply chains. The most critical component of competing in today’s worldwide marketplace is understanding how and why. Supply networks that are linked together:
- Allow firms to compete more effectively on price by avoiding squandered time and materials and reducing the number of middlemen.
- By having fewer linkages in the supply chain from back to front and closer coordination between delivery, warehousing, and transportation, enterprises can shorten their product life cycles.
- Allow businesses to react more quickly to market developments and stake claims on new markets to gain an early lead.
What is a Supply Chain?
To comprehend integrated supply networks, one must first understand what a supply chain is.
A supply chain is a group of suppliers who work together to manufacture a single product for a company. Each supplier is a “link” in the chain, adding both time and money to the equation. Supply chain management is a set of approaches, beliefs, and practices aimed at keeping a supply chain operational and enhancing its efficiency for the advantage of the majority, if not all, of the links.
What is Supply chain Integration?
Supply chain integration is a large-scale business approach that aims to bring as many parts in the chain as possible into closer collaboration. The goal is to reduce expenses and waste while improving response time and production time. Every link in the chain reaps the rewards. An integration can be done tightly by merging with another supply chain company, or it can be done loosely by sharing information and working more closely with specific suppliers and customers. The supply chain in the latter situation isn’t fully “owned” by one company, but the many parts work together to boost efficiency and benefit everyone through consistent, reliable operations.
Horizontal integration refers to any actions that are made at the same “level” of the supply chain as the entity that is making them. A central processing unit (CPU) manufacturer buying another in order to serve a broader swath of the CPU market, for example, is an example of integration. This kind of partnership might help the company get a lot more consumers while also giving them more influence over CPU pricing and supply.
Any step that involves multiple layers of the chain is referred to as vertical integration. It could entail merging or purchasing a link ahead of or before your company, or building your own capabilities to manage the full supply chain from beginning to end. If the CPU manufacturer mentioned before additionally bought a smartphone product development firm, they would be able to control more tiers of their supply chain, such as major parts and the finished product. This type of acquisition might provide the company more control over its expenditures, give them a bigger piece of the earnings pie, and cut waste and manufacturing time.
ALTUS Malaysia specializes in supply chain integration services and has served as a trusted company for all of Malaysia’s supply chain integration needs for a very long time. To learn more about supply chain integration and what it does for companies, visit ALTUS Malaysia today.