Introduction

As globalization continues to intensify international competition, businesses are turning to supply chain integration as a means to cut costs, improve efficiency and remain relevant in the industry. It is a fact that globalization broadens markets as companies can transact and sell their products overseas. However, expanding the market raises the question of increased supply chain management costs. In most cases, the primary goal of any business is to make a profit, and since profit is the difference between revenues and expenses, an increment in costs directly implies a decrease in the company’s profits. To maximize profit, therefore, a business ought to try its level best to cut unnecessary costs associated with doing business. Given the fact that an organization incurs many expenses, supply chain integration can substantially help a company to reduce the costs of operation and maximize its profits. The primary essence of a supply chain is to present the right product to the right person at the right time. Therefore, a supply chain that does not guarantee that is as good as dysfunctional. Executing an efficient supply chain in the ever-expanding, variant rich, and diversified global business network is becoming increasingly hard. Nonetheless, supply chain integration has become a prominent solution to this problem as it simplifies logistics and makes the platforms less complicated. Supply chain integration has eased and reduced costs involved in activities such as sourcing of raw materials, transport and warehousing, assigning production programs, delivery of products to customers, and management of the customers. The automobile industry is an example of sectors where supply chain management integration thrives because it has helped companies to control their supply situations and gain essential insights into their value chain efficiency and functionality.

In the current paper, I will explore the idea of supply chain integration and how Apple Inc has used the approach to the company’s advantage.

The Concept of Integrated Supply Chain Management

Integrated supply chain management is a form of administration that uses an enterprise resource management approach. Here, instead of having various supply chain management systems in its different departments, a company uses a centralized supply chain management system in the facilitation of supplier relationships and management of its logistics and distribution activities (Kokemuller, 2017). In any company, the supply chain managers are tasked with the duty to ensure optimum efficiency in distribution activities. Therefore, through efficient and cost-effective supply chain management, a company can actualize the primary goal of supply chain management, which is delivery of the best to its customers. In the past, supply chain management systems failed because they lacked coordination and collaboration among supply chain members. Each member concentrated on personal roles of taking materials and products to other companies. Consequently, such autonomy in operations made processes inefficient and costly thus impeding the goal of delivering the best value to customers. Nonetheless, the idea of integrated supply chain management has revolutionalized operations in the 21 Century. Integrated supply chain management ensures that members and teams in supply chain realize that they are working towards the same end goal and, therefore, should collaborate and coordinate (Kokemuller, 2017). Through the coordination of managers in supply chain management and collaboration among members of supply chain teams, integrated supply chain management can ensure efficiency and streamline activities. It can link groups in different departments in such a way that all departments share ideas and programs aimed at managing distribution and logistics.

The strength of an integrated supply chain management system lies in real-time exchange of data, analytics, and sensitive information among the players in departments and other members involved in the supply chain network. The inclusion of a real-time exchange of information means that integrated supply chain management goes beyond the mere supply chain activities such as, moving materials and managing logistics.

Despite having much more benefits over the supply chain management as practiced earlier, implementation of integrated supply chain management poses several challenges. First, collaboration is hard to implement in today’s globalized market because most companies, especially the manufacturing companies have their production plants and their distribution hubs spread across the world. Thus, scattering these hubs creates networks of production platforms, which are hard to manage because the diminish the applicability of end-to-end visibility. The end-to-end visibility is necessary because it ensures that networks produce the right products at the right time while observing the applicable rules and restrictions (Ostdick, 2017). An Integrated supply chain management system should, therefore, be in such a way that it allows for real-time adjustments and modifications of planned production programs so that it guarantees an efficient and cost-effective delivery of goods to customers at the right time and quality. Secondly, there is the problem of lack of transparency in regards to the flow of material and inventory status. Supply chain involves many people, production plants and large quantities of raw materials and products between the creation and delivery of products to the final customer. Therefore, viewing, tracking, and modification of parts and inventory levels is difficult. For that reason, a fully integrated supply chain management system should make use of highly intelligent planning software and strategies. Such approaches include, Every Part Every Interval (EPEI), Plan for Every Part (PEP) and, other container management strategies which, in addition to aiding information sharing between sales and planning levels, create a more accurate forecast of the future performance using the past performance (In Devaux, In Torero, In Donovan, & In Horton, 2016). As such, it becomes easy to meet coverage levels, and production can proceed as planned. The third challenge is brought about by the dynamics in the production networks architecture. In today’s business environment, production parameter, inventory and material levels, and business disruptions keep changing. Sharing of valid, updated and detailed information among the players in the supply chain is, therefore, essential in production platforms. Furthermore, It assures that organizations are robust and can withstand on-spot changes and modifications. A fully integrated supply chain management system should, thus, provide a platform for sharing timely, accurate and detailed information among leaders and team players in the supply chain (Ostdick, 2017). Further, coordination and collaboration are two processes that highly depend on the company culture. For a company to fully and quickly implement an effective enterprise resource planning program, it should have a culture that encourages collaboration among members of the company teams. The lack of such a supportive culture makes enterprise resource planning challenging to implement and can hamper the performance of an integrated supply chain management system. Lastly, an integrated supply chain program relies on efficient and timely sharing of information among leaders across departments or divisions. In some cases, divisional or departmental leaders in some companies are unwilling to share information about processes and resources with others, and that can substantially undo the whole idea of an integrated supply chain program. In regards to information, integrated supply chain calls for sharing of company data with suppliers who are outsiders. As such, critical information about the company could fall into the wrong hands, and this can damage its reputation. Lastly, implementation of integrated supply chain requires huge technological and infrastructural investment, which may not be feasible for some companies.

Despite these shortcomings, integrated supply chain management is essential in modern and global supply chain management because it makes supply chain processes efficient and cost-effective. Additionally, it establishes healthy and lasting relationships between a company and its suppliers, which is core to meeting company’s profitability goals and gaining competitive advantage.

Integrated Supply Chain Management and Cost Effectiveness

The primary motivation behind integrated supply chain management is to reduce the costs involved in a supply chain with the aim of increasing company profits and competitiveness in the market. Integrated supply minimizes costs in several ways. First, it reduces the number of employees in the supply chain. Initially, team members in the supply chain used to work alone moving materials and products from one supply chain to the next (Autry & Moon, 2016). However, supply chain calls for the employment of many workers because of that independence. Integration, on the other hand, calls for teamwork and collaboration among members in departments involved in the supply chain. Collaboration in that sense reduces the number of people required in a particular stage of a supply chain (Lan, & Unhelkar, 2006). In an integrated supply chain, a task that formerly required more workforce can be accomplished by a few individuals within the shortest time possible because of the ease of sharing information. The technologies used further reduce the need for people to manually handle the data required for proper functioning of the supply chain.

Integration of supply chain eliminates time wastage. Time is a critical resource in any company. Integrated supply chain allows real-time sharing and analysis of information implying that any form of delay will be communicated and handled immediately. Delays are costly to a company because it means the extension of time frames and the addition of resources. For example, If an activity that is supposed to take three hours takes five hours, the company will have to pay a wage for two extra hours, which implies an increased wage bill. Therefore, by reducing the time required for each activity in the supply chain, integrated supply, helps the company to save on extra the wage bill and reduce the usage of company resources. Additionally, integration reduces material wastage in the supply chain. It allows for direct communication between the suppliers and managers and between the managers and customers. The implication is that the company will not order from the supplier more than it can use and it will not produce more than it can sell within a given time frame. Wastages in warehouses will, therefore, be minimized. As earlier mentioned, the integrated supply chain also makes use of just enough employees. Thus, wastage associated with having many hard-to-manage employees will be absent. Eventually, supply chain costs used in dealing with many brokers will be eliminated.

Integration also eases and hastens communication between suppliers, customers, and supply chain managers, which in turn helps an organization to shorten their product life cycles. Because products are moving fast, a company utilizing integrated supply chain incurs low costs in regards to warehousing, product returns, and other associated costs. Such an advantage is attributed to tightened coordination between storage, transportation, and delivery. Lastly, an integrated supply chain allows a company to get information about changes in the market and opportunities for expansion. Unlike companies using traditional supply chain management systems, a company using an integrated supply chain can quickly get information about customer dissatisfaction, analyze it and make the necessary correction without wasting money on researching the market. It also does not need to use its resources on market research for new expansion opportunities as it gets the necessary information from its middlemen.

Integrated Supply Chain and the End User of A Product

The end user is among the greatest beneficiaries from supply chain integration. The benefits to the customers range from price to the quality of products. A company that uses a supply chain enjoys huge savings from warehousing, low wage bills, less material wastage, low-cost collection of information among other costs. The implication is that such a company will produce its products at low costs. A company that manufactures at low costs will automatically sell its products at lower prices in comparison to a competitor who uses traditional supply chain management practices. Therefore, the consumers of a company that uses an integrated supply chain will enjoy quality products at lower prices (Lambert, 2008). Secondly, integration makes supply chain flexible enough to allow for the incorporation of consumer wishes and specifications in the production process. The integration allows for open and direct communication between the middlemen and the company and sometimes the customers (Mentzer, 2004). If customers detect any problem with the product, integration allows the company to search for information in time and make the necessary changes to maintain the quality of the product. The customers may also offer suggestions about products, and since the supply chain is flexible enough, the company can incorporate those suggestions in its production and improve the quality of products (Lambert, 2008). Availability of products is another way through which a customer benefits from an integrated supply. A tightly integrated supply chain ensures that the customer gets the product at the right time, place, and quality. Interruptions of supply are rare with an integrated supply chain.

Supply Chain Integration At Apple Inc.

Apple Inc leads in the technology industry. The company has long been lauded for its innovation, which according to the public, is behind the company’s immense success over the years. Well, Apple has shown unmatched innovation since its inception, and that innovation has not left out supply chain management. Integrated supply chain management calls for tight relationships between a company, its suppliers and customers. Apple has excelled in maintaining a healthy and robust relationship between itself, suppliers and, customers across the globe. Between 2010 and 2013, the company’s supply chain management was ranked number one in the world (May, 2015). The strength of the company lies, to a large extent, on its integration of supply chain activities because it has been using several suppliers to provide the same material for many years. Furthermore, the company boasts of a vast network of suppliers within its supply chain. Research shows that the company has around 785 suppliers in 31 countries across the world where 349 of them are in China. Additionally, 200 suppliers account for the firm’s 97% in manufacturing, procurement, and assembly, which implies that around 585 companies share the remaining 3% (May, 2015). Through its integrated supply chain management, the company has managed to establish a long-term relationship with its suppliers by engaging them in long-term engagements and, using prepayments as a means to negotiating pricing terms, securing strategic raw materials and guaranteeing high production volumes (May, 2015). The company’s integration of the supply chain has also allowed diversification, which in return has permitted the inclusion of new manufacturing partners from Taiwan and China. In its research and development strategies, the company’s supply chain allowed the company to secure several suppliers to supply raw materials for its new products like the Apple watch. To better its relationship with partners, the company has heavily invested in customized equipment for manufacturing, milling technologies, and automated assembly equipment.

Apple Inc has also engaged in corporate social responsibility in a bid to strengthen its relationship with society and customers. For example, it collaborated with its Chinese partners and created an environmental program aimed at minimizing carbon emission and encourage utilization of clean energy sources. Notably, Apple’s use of several suppliers to render the same component has several advantages. First, it has mitigated disruptions and delays in the supply chain, which has resulted in the maintenance of gross margin (May, 2015). In addition, the company can adjust ordering ratios with its current suppliers to minimize third-party dependency. In response to variations in consumer demand, integration allows the company to improve the production capacity according to the change. The company also enjoys low costs of production as the many suppliers at its disposal compete for business. Moreover, Apple Inc processes high volumes of pre-orders that it uses to forecast demand. Lastly, by maintaining exclusive relationships with suppliers, Apple Inc strategically prevents competitors from using a similar production model. Because of these aspects of supply chain integration, the current Apple Inc CEO, Tim Cook has been described by many supply chain practitioners as the “supply chain specialist” (May, 2015). The company is said to have the best supply chain management strategies in the world.

Conclusion

Supply chain integration is an essential tool that makes a company relevant and competitive in a highly aggressive global business environment. One of the best-known strategies and, which many companies use is cost minimization. Implementing an integrated supply chain management system is one of the ways through, which a company can minimize costs and increase profits because most of the company’s expenses are incurred in supply chain activities. An integrated supply chain makes the operation of a company more efficient and cost-effective. Wastage of resources like time and materials is also highly minimized. Regarding cost-effectiveness, a company reduces expenses incurred in storage, transportation, information collection and product development among other costs. Many companies have shown that the integration of supply chain activities can substantially reduce costs and improve the firm’s performance. For example, Apple has over the years managed to create and maintain lasting relationships with its suppliers, the society and customers. In return, the company has had the pleasure of being a market leader in its industry and having one of the best supply chain management strategies.

References

Autry, C. W., & Moon, M. A. (2016). Achieving supply chain integration: Connecting the supply chain inside and out for competitive advantage. Old Tappan, New Jersey: Pearson Education, Inc

In Devaux, A., In Torero, C. M., In Donovan, J., & In Horton, D. (2016). Innovation for inclusive value-chain development: Successes and challenges. Washington, DC: International Food Policy Research Institute

Kokemuller, N. (2017, September 26). What Is Integrated Supply Chain Management? Retrieved January 31, 2019, from bizfluent.com/about-6690370-integrated-supply-chain-management-.html

Lambert, D. M. (2008). Supply chain management: Processes, partnerships, performance. Sarasota, Fla: Supply Chain Management Institute.

Lan, Y., & Unhelkar, B. (2006). Global integrated supply chain systems. Hershey, PA: Idea Group Pub.

May, G. (2015, September 11). A case study of Apple’s supply chain. Retrieved January 31, 2019, from aicd.companydirectors.com.au/advocacy/governance-leadership-centre/governance-driving-performance/a-case-study-of-apples-supply-chain

Mentzer, J. T. (2004). Fundamentals of supply chain management: Twelve drivers of competitive advantage. Thousand Oaks, Calif: Sage Publications.

Ostdick, N. (2017, August 8). The Challenges of Supply Chain Integration. Retrieved January 31, 2019, from blog.flexis.com/the-challenges-of-supply-chain-integration

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