Chapter 8

Integrating the
supply chain

Content
Integration in the supply chain
Efficient consumer response

Collaborative planning, forecasting and replenishment

Managing supply chain relationships

A framework for managing the supply chain

Integration in the supply

chain

Key issue
1

How can we integrate

internally, externally and
electronically?

Integration in the supply

chain

What is Supply Chain Integration

the degree to which the firm can

strategically collaborate with their supply
chain partners and collaboratively manage
the intra- and inter-organization processes
to achieve the effective and efficient flows
of

Product and services

Information
Money
Decisions

With the objective of providing the maximum

value to the customer at low cost and high speed

Integration in the supply

chain

Measures of integration

Access to planning system

Sharing production plans
Joint EDI access / networks
Knowledge of inventory mix / levels
Packaging customization
Delivery frequencies
Common logistical equipment /
containers
Common use of third-party logistics

Integration in the supply

chain

Internal integration: function to

function
Purchasing

Production

Distribution

Low price

High productivity of
machine and labor

Keep warehousing
operation smooth

High batch size

Post-manufacturing
operation being
resisted

Poor available
distribution

Additional complexity
of customizing
products

Unreliable delivery
and low quality

Integration in the supply

chain

Inter-company collaboration: a manual

Strategic
approach
Collaboration
Decision Flow

Products & Services Flow

Enterprise
A

Information & Knowledge Flow

Enterprise
B

Financial Flow

Information & Knowledge Flow

Financial Flow
Decision Flow

END CUSTOMERS

RAW MATERIALS

Products & Services Flow

Integration in the supply

chain

Electronic collaboration

Transactional
The electronic execution of
transaction
Information sharing
The electronic sharing or
exchange of information
Collaboration planning
Strategic, tactical and
operational exchange

Electronic
collaboration

Integration in the supply

chain

Information
flow in
apparel
supply chain

Content
Integration in the supply chain
Efficient consumer response

Collaborative planning, forecasting and replenishment

Managing supply chain relationships

A framework for managing the supply chain

Efficient consumer
response

Key issue
1

How can collaboration be

extended across the supply chain
to focus on meeting consumer
demand?

Efficient consumer
response

Category management

Category
manageme
nt

Establish
infrastructu
re

Optimize
introduction
s

Optimize
assortments

Optimize
promotions

Product
replenishme
nt

Integrated
suppliers

Synchroniz
ed
production

Continuous
replenishme
nt

Automated
store
ordering

Reliable
operations

Enabling
technologies

EDI

Crossdocking

EFT

Item coding
and
database
maintenanc

ABC

Continuous replenishment

Efficient consumer
response

Enabling technologies

Scanning data
Data warehousing
Data mining

The data include

Demand / consumption / sales information

Cash flow
Stocks of finished goods / work in progress
Delivery and output status

Efficient consumer
response
Category
Continuous

Enabling
management replenishment technologies
Account
Joint
Effective
management inventory
information
management sharing
Demand
Automated
management Cross-dock
order
Require Multifunction operations
generation
Continuous
al selling
d
replenishment Bar-coding
capabilit teams
and the use
Price list
Effective
y
of other
restructuring
logistics and
scanning
Effective and product flows
technology
Quick
customized

Content
Integration in the supply chain
Efficient consumer response

Collaborative planning, forecasting and replenishment

Managing supply chain relationships

A framework for managing the supply chain

Collaborative planning,
forecasting and
replenishment

Key issue
1

How can collaboration be

extended to strategic as to well as
operational levels?

Collaborative planning,
forecasting and
CPFR Model
replenishment
Planning

Forecasting

1.
2.
3.
4.
5.
6.
7.
8.

replenishment

9.

Develop front-end agreement

Create joint business plans
Create individual sales forecasts
Identify exceptions to sales forecasts
Resolve / collaborate on exception
items
Create order forecast
Identify exceptions to order forecast
Resolve / collaborate on exception
items
Generate orders

Wal-marts CPFR
Process
FRONT END AGREEMENT

Seller
Collaborative
Planning

JOINT BUSINESS PLAN

CREATE SALES FORECAST

Collaborative
IDENTIFY
EXCEPTIONS
Goal : Link
buyer and Seller Forecasting
Electronically
RESOLVE
EXCEPTIONS
CREATE ORDER FORECAST
IDENTIFY EXCEPTIONS

Collaborative
Replenishment

RESOLVE EXCEPTIONS

Buyer

GENERATE ORDER

Wal-Marts CPFR
Program

CPFR has blurred the lines between

supplier and customer
Suppliers buy into their program because
they have to to work with Wal-Mart, but
more importantly, because Wal-Marts
Systems provide increased profits for WalMart and their suppliers
Wal-Mart teaches their suppliers how to
minimize shipping, inventory and other
costs by showing them their own model.

Content
Integration in the supply chain
Efficient consumer response

Collaborative planning, forecasting and replenishment

Managing supply chain relationships

A framework for managing the supply chain

Managing supply chain

relationships

Key issue
1

How can broader-based

relationships be formed between
trading partners in the supply chain?

Managing supply chain

relationships

Creating closer relationships

Partnership

Arms length transaction

R&D

Marketing

Logistics

Operations

Informatio
n system

Informatio
n system

supplier

customer

Bow tie

R&D

Marketing

Logistics Operations
InformatioInformatio
n system n system

supplier

customer
Diamond

Managing supply chain

relationships

Factors in forming supply chain

relationships

The order winner

The method making sourcing decisions
The nature of electronic collaboration
The attitude to capacity planning
Call-off requirements
Price negotiations
Managing product quality
Managing research and development
The level of pressure

Content
Integration in the supply chain
Efficient consumer response

Collaborative planning, forecasting and replenishment

Managing supply chain relationships

A framework for managing the supply chain

A framework for
managing the supply
chain
Key issue
1

What are the management

implications of integrating the
supply chain?

A framework for
managing the supply
6
chain
Develop
measurement
system for supply
chain performance

Organize for
supply chain
performance

Pilot new supply

chain solutions

Develop a supply
chain strategy

Gather supply
chain information

3
Develop effective
partnerships and
alliances

A framework for
managing the supply
Develop
chain a supply chain strategy

Customer service requirements

Plant and distribution center network design
Inventory management
Outsourcing and third-party logistics
relationships
Business processes
Organizational design and training
requirements
Performance metrics and goals

A framework for
managing the supply
chain

Pilot new supply chain solutions

Successful supply chain improvement

including
Involvement of key stakeholders, suppliers,
customers and employees
Selection of scope and environment, focusing
on avoiding risk
Identification of the key questions that the pilot
must answer

A framework for
managing the supply
chain
Develop measurement systems
for supply chain performance
On time in full, outbound
On time in full, inbound
Internal defect rates
New product introduction rate
Cost reduction
Stock turns
Order to delivery lead time
Fiscal flexibility