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Home : Articles : Supply Chain : Supply Chain Integration

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SUPPLY CHAIN INTEGRATION

Once the idea of significant business collaboration was farfetched. Most companies were only interesting in getting ahead on their own terms and without interference from other companies, particularly those that might be competition. However, in recent years, those attitudes have changed and more businesses are finding that working together can be more rewarding than trying to go it alone.

Collaborating with suppliers, for instance, definitely has many advantages. One major vendor decided to collaborate with a buyer by developing a web-based program that allows them to monitor the buyer's inventory levels and to ship goods whenever those levels fall below an agreed upon amount. The result has been mutually beneficial. The buyer maintains the goods they need to do business and to keep their customers satisfied, and the supplier ensures a continuation of their vendor/buyer relationship. This process decreases expenses because suppliers only have to send shipments when they are needed; resulting in a reduction of storage and inventory holding requirements.

Of course, those types of collaborations are not the only examples. Vendors involved in the logistics end of the supply chain can also collaborate. If one company is shipping to Denver from Chicago and another company is shipping from Chicago to Denver, then instead of having two different trucks take care of those shipments, it makes economical sense to have only one take care of both. However accomplishing those types of arrangements requires communication and advance planning: two things that are definite aspects of collaborative relationships.

While there are obvious profitable benefits inherent in these types of collaborations, they can sometimes be difficult to set up. Companies, particularly those in the same industry, will naturally be leery of attempts to share business by working together. For that reason, many firms are finding that it helps to have a liaison. These liaisons are generally neutral organizations which can negotiate an agreement between the companies involved and that can help iron out all the details so that the arrangement runs smoothly.

Obviously one of the major problems involved in collaboration is finding solutions that will benefit all partners. In some cases and in the worst-case scenarios thought up by potential partners, one side of the collaborative equation ends up reaping extra profits, increased productivity, and/or increased revenue while the other side struggles to stay competitive in their industry and to work with other customers. Striking that balance is something that requires significant planning. Plus, planning in advance how the relationship will play out can help a business inspire others to join in since they'll be able to clearly outline the benefits to all of those who are involved not just to themselves.

Another problem is the technology itself. Unfortunately, not all businesses today are at the same place technologically. Some companies have stay-of-the-art computers, fully-implemented ERP systems, and effective e-procurement programs while others are still barely turning on their computers and are having to look up acronyms like SCM (supply chain management). Collaborations today usually involve technology in some capacity so this difference can be problematic. Part of overcoming this potential problem is selecting vendors and suppliers who are already at the same technological level. Another solution is to simply be able to clearly define the benefits of upgrading computer systems to the other businesses. Many stragglers simply have never realized the potential benefits their business can access simply by joining the technology revolution.

If current trends are any indicator, collaboration is definitely on the upswing for both buyers and vendors. While so many companies are feeling the pinch from offshore competitors, valued-added collaborations that provide extra profitability and increased security are the best answer for a great number of businesses.

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