Surviving through a tough market requires customers and suppliers to break down their silos to effectively work together and share data and knowledge.
Editor's Note: This article contains excerpts from "Supply Chain Synchronization: Recession-proof Strategies for Improving Efficiencies," a free white paper that you can download from the MC White Paper Center.
Whether you're a supplier, distributor, manufacturer, or retailer, the supply chain is the "lifeblood" of your organization. Like the circulatory system of the human body, the supply chain plays a vital role in the overall health of your business. If your company is starting to feel a tingling sensation in the left arm of your supply chain, then information bottlenecks and manual procedures are most likely blocking the main arteries of your supply chain network.
This article provides a solid explanation of the key concepts that drive the supply chain and sheds light on how we can use technology to address the integration gaps and reduce the complexity of our current supply chain procedures. To be competitive—or to simply survive—members of the supply chain must band together to ensure the right products get to the right place at the right time for the lowest possible price. For this to happen, collaboration among trading partners must exist, and well-orchestrated processes must be in place to achieve a continuous exchange of key information.
Supply Chain Collaboration
Let's face it: Today's supply chain has become very complex. Each step within a business process is dependent on one or more other processes, many of which are managed by other people or companies. In addition, there is a greater need for data to be exchanged in real time, in a broad range of different formats, over a variety of different protocols. The data must be accurate and remain clean as it makes its way downstream into the systems of our trading partners. The same holds true for our internal applications and business processes.
Supply chain collaboration is not a new concept. It's been a popular topic of interest for a few decades, and many initiatives have been put into play in an attempt to allow suppliers and customers to collaborate as one, rather than working on islands. Even with heavy use of technology, supply chains still suffer from integration gaps because a lot of applications tend to run in silos, issues with data accuracy and reliability still exist, and time-consuming manual processes decelerate the adoption of real-time collaboration between all the supply chain parties. This results in serious inefficiencies that negatively impact the profitability of our business.
Supply Chain Synchronization Phases
Supply chain synchronization often follows three distinct phases. These phases can be classified as connection, communication, and collaboration.
- Phase I: Connection—In the connection phase, customers and suppliers begin to establish electronic links between their computers, allowing the exchange of key documents or transactions.
- Phase II: Communication—During Phase II (communication), companies begin to break down their silos by focusing on internal optimization of business processes rather than individual transactions between their organization and a few key suppliers.
- Phase III: Collaboration—During Phase III (collaboration), trading partners open their processes to one another with a great level of trust and reliance.
Companies need to support the coordination of upstream processes (procurement) and downstream processes (sales) because these applications assist in matching up the supply and demand sides of business integration. In a well-oiled supply chain cycle, products are manufactured based on the customer's forecasted demand with the ability to make quick adjustments in response to the customer's changing needs.
Considering that business partners use different technologies, architectures, data formats, and tools, there must be coordination of technologies and procedures across all parties of the supply chain. Use of multi-faceted software can reconcile and bridge the gaps between various formats and technologies. In order to seamlessly fuse internal and external processes requires two directives. First, internal initiatives must require software applications to have the scalability, capability, and agility of automating internal processes as needed. Second, external processes must require software to have the ability to transform data in different formats from different sources.
Unfortunately, small- to mid-sized companies tend to follow the mandates driven by their larger customers. Inevitably, this approach translates into the adoption of new technologies every time a new mandate or requirement is thrown into the mix. Over time, these companies can end up with siloed solutions because they continue to implement specific, disparate processes while trying to satisfy the requirements from their large customers as quickly as possible. The problems associated with siloed solutions are inconsistent results, support of multiple standards and infrastructure, increased costs, redundant efforts, and longer time to market.
Programmatic Integration of Existing Solutions
You may connect the different integration tools by building interfaces among them that transform components such as data formats to create an automated bi-directional exchange of information. As such, your EDI and XML input and output requirements can be managed. The greatest advantage of this approach is that it leaves what works intact but extends its capabilities to other "systems." But disadvantages abound. You end up with inefficiencies often associated with Band-Aid solutions. You still have the pain of managing multiple standards, infrastructures, architectures, and skills. And as new requirements are added, ongoing maintenance and adjustments are needed, each potentially leading to a custom configuration or rewrite. These programmed integration solutions are time-consuming to develop and expensive over time. Although these extended solutions may meet your short-term requirements, in the long term they're not scalable or adaptable to new, yet undefined business mandates.
Acquire Business Process Integration Software
Should you choose the approach of leveraging one solution to allow shared integration among all your supply chain automation tools, you must clearly define your requirements and carefully evaluate your options. It is important to not only consider current business mandates of customers, suppliers, and other third parties, but also take into account emerging requirements.
In addition to considering the integration software's ability to meet different technology requirements, it's important that it's built on a common architecture and is modular in design. This solution should be built using a single language and architecture, eliminating the need for managing resources with different skills, for purchasing and maintaining multiple software licenses, and for building and managing multiple integration points. You will experience faster turnaround as you add new partners and capabilities, more consistent results, and more seamless integration with back-end applications.
In Today's Tough Economy
Today, with purse strings tightening across the board, many companies have cut budgets, from travel to research and development and marketing. At the same time, IT budgets have increased, in some cases, due to the recognition that the value of automation far outweighs its costs. To survive a tough market and thrive post-recession, customers and suppliers must invest in breaking down the silos between them. These silos include not just data but key information about one another's business. Supply chain members who integrate their processes and effectively work together to share data and knowledge are the ones who will be around years from now to serve their customers.
To find out more about how your organization can synchronize your supply chain, download the free white paper "Supply Chain Synchronization: Recession-proof Strategies for Improving Efficiencies" from the MC White Paper Center.