Integration In Supply Chain Management

956 Words4 Pages
What is Supply Chain Management? This essay is about defining “what is supply chain management.” We will look into the different areas of a supply chain and the way they are managed. We will also study the way supply chains work on an international level. A supply chain is defined as the process that encompasses production from the raw materials all the way to the end customer. Supply chain management focuses on the overall flow and integrates the supply and demand management across the companies whom are involved in the specific supply chain, in order to deliver customer value at the lowest cost (Blanchard, 2010). The market forces and constant changing demand drive a supply chain, and the success of a supply chain creates competition…show more content…
The focal firm must develop company strategies and then outsource to external organisations both upstream and down stream, to will help them achieve their strategy. Each part of a business has there own individual objectives to create value in the business. This may be hiring the right employees, controlling finances or building relationships with others in the supply chain. There are 4 levels of integration, which lead to a cohesive supply chain. Internal process integration aims to increase relationships within the company’s functional sectors, in order to promote an efficient workplace. Backward and forward process integration aims to collaborate with the 1st, and sometimes 2nd, tier organisations and build successful relationships. Forward integration reaches downstream to the customers, and customers’ customers, whist backward integration leads upstream to the first and second tier suppliers. Lastly, complete integration is the ideal theory that promotes open communication and strong relationships in order to add the most value to the supply chain as possible (Fawcett,…show more content…
Without these, there is great risk of creating the bullwhip effect. The bullwhip can be defined as the amplification of demand order variability’s in the supply chain. The bullwhip effect begins at retail level, when demand for products slightly change. To ensure each party along the supply chain has enough stock to equal demand, orders are slightly exaggerated in order for them to have ‘just-in-case stock’. Larger orders are made as we move further from the retailer. Once the demand has decreases again, all upstream suppliers have excess product because they have safety stock. This causes them to reduce their orders and this effect ripples through the supply chain. The bullwhip effect leads to unnecessary increased costs, potential wastage and inconsistent orders, creating a difficult supply chain to manage. In order to minimize the consequences cause by the bullwhip effect, the members of the supply chain need open connections and communication, and each party needs to create strategies that benefit not only themselves but those both upstream and downstream from
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