Why an Integrated Supply Chain Is Critical for Recovery
The entire supply chain has taken a major hit. As the world works toward moving forward post-COVID-19, the global supply chain is still trying to recover too.
During the pandemic, multiple national and international lockdowns halted manufacturing. At the same time, customers began demanding certain health and wellness products, which resulted in retailers doing the same. Although some demand fluctuation is to be expected, the supply chain wasn’t prepared for this.
According to Accenture, 94% of Fortune 500 companies are seeing supply chain disruptions. And now, even as we move towards greater resiliency and stability, challenges continue to arise, from ships being unable to unload on the coast to labor shortages.
What can distributors of all sizes do to start to offset these challenges and move forward? The answer lies in having better integration with all points of their supply chain, including customers, vendors, shipping, manufacturing and warehouse providers.
Current Challenges in the Supply Chain
At the time this was written, over $26 billion worth of cargo was stuck on container ships off the coast of California. A total of 79 ships were awaiting unloading, full of products that consumers were waiting on for the upcoming holidays.
Why the backup? Warehouses, shippers and logistics companies couldn’t handle the number of ships and amount of cargo entering the ports. There was also not enough skilled labor available for the unloading process and a decrease in truckers available to move products to retailers.
All of this directly impacts the consumer. Customers want an “Amazon-like” experience no matter who they order from. Unfortunately, due to breakdowns in the supply chain, distributors are unable to provide the “order it and get it” experience consumers expect.
Lead times are ever-increasing in this environment. While international lead times reached an incredible 200% increase in 2020, they’re still long. For importers, lead times are typically 45 days, but now, it’s still at least double that.
Traditional Supply Chain Models No Longer Cut It
One thing is for sure, the traditional, non-integrated supply chain is broken. Siloed operations between partners can create a number of challenges, such as:
- Lack of flexibility: Organizations should be flexible enough to adapt to changing environments quickly. For example, distributors should be able to make quick decisions based on the market and adjust their processes in real-time to better serve their customers.
- Subpar communication: Supply chain partners should be able to seamlessly communicate with one another regarding stock, lead times, shipping and more. This enables distributors to answer questions regarding orders and make accurate business decisions.
- Zero visibility: A lack of visibility means that companies have a harder time seeing what is in stock and available to customers. Unfortunately, this can result in stock level shortages and delays, or having too much stock and taking a hit to your bottom line.
Non-integrated supply chains are less profitable, more labor-intensive and inaccurate. As a distributor, doing your part to implement an integrated supply chain is a great first step toward end-to-end efficiency and preparing your organization for supply chain disruptions.
While supply chain integration won’t fix the supply chain entirely, it can provide much-needed efficiency within your processes.
What Is an Integrated Supply Chain?
Integration means technologically connecting every phase and partner in a supply chain from raw material procurement to final delivery to the customer. In an integrated supply chain, all partners can exchange information regarding a product’s lifecycle.
Each stakeholder can come together to form what almost operates as one organization to improve efficiency and reduce costs.
Example: Reliance Communications
Reliance Communications, a national distributor of wireless devices and accessories, required efficient product tracking and inventory controls. After all, their clients depend on them to ship products when they need them as they can’t afford to miss product launches or stock stale products.
Unfortunately, Reliance’s previous inventory system failed to give them an accurate view of stock levels, locations and intuitive reporting to track all phases of customer activity. To combat this issue, Reliance partnered with VistaVu Solutions to integrate with SAP Business One and Resolv.
As a result, Reliance reduced order errors to less than 0.1%. They were able to create new processes for immediate receiving and shipping of large quantity, high-volume products, shipping more than 1.5 million smartphones within the first month after implementation.
The Benefits of an Integrated Supply Chain
Developing an integrated supply chain has many advantages for your organization, your partners and your end consumers, such as:
- Automated and efficient processes: If you can electronically integrate with your systems and the systems of other stakeholders, you can automate time-consuming and error-prone processes. For example, you can send a manufacturer a purchase order electronically which can then be input automatically; no data entry is required. Reducing the number of manual processes in your supply chain improves overall efficiency and accuracy for all parties.
- Product visibility: Visibility through integration allows you to avoid running out of stock or ordering too much stock than you can handle. As a result, you can deliver on customer demand and reduce waste.
- Reduced lead times: Integration enables you to visualize your entire supply chain, so you can better anticipate disruptions and make quick decisions regarding your products and logistics to reduce lead times.
- Cost savings: With integrated processes, you can save costs by reducing required warehouse space, removing the need for data entry teams, limiting the amount of waste and more.
- Improved customer satisfaction: Better communication through integration can enable you to provide answers and manage expectations with your customers when orders are delayed. In addition, faster backend ordering means reduced lead times, which in turn results in happier customers.
Take These Two Steps to Get Started in Your Organization
If you’re unsure about which areas in your operations you should begin to automate and integrate, there are two steps you can take immediately to move in the right direction:
- Review Your Critical Business Processes
First, perform a high-level business process review in the key areas of your business by answering these questions:
-How do you communicate and transact with your vendors, manufacturers and customers?
-Within those processes, which ones are automated and integrated end-to-end and which are not?
-What is the cost to your business for areas that are not integrated, require manual intervention or require duplicate efforts and data?
Understanding the resulting data will assist you in determining costs and the impact on your bottom line, so you can prioritize where to begin. Areas to pay close attention to include:
- Bottleneck areas: Review your processes and supply chain cycle to identify bottleneck areas.
- Duplicate data and manual processes: Are there areas in your systems and processes that include duplicate data or that require duplicate data entry? For example, this may include data in your ERP that’s separate from data in your EDI, WMS or eCommerce.
Areas of high impact: Look for areas of your supply chain that have the greatest impact on your profits and customer service levels if they’re not integrated.
- Communicate With Your Partners
If you’re not integrated with your customers, vendors and other partners, it’s likely negatively impacting their efficiency levels too. Once you determine the key areas you should integrate first, reach out to your channel partners to discuss what technologies they already have in place.
You should discuss how you and your partners can work together to integrate your joint portion of the supply chain to support both organizations.
Drive End-to-End Efficiency in Your Supply Chain Through Integration
Will we see another pandemic that disrupts our entire supply chain in our lifetimes? It’s impossible to say. But no matter what, it’s critical to have an efficient and flexible supply chain to stay competitive within your industry and be prepared for whatever may happen next.
For help in building an integrated supply chain within your organization or to get advice on your critical processes and technologies, reach out to VistaVu Solutions by visiting our website or learn more about our integrated wholesale distribution solution.