Integration of Supply Chain

Organizations or companies that intend to use Supply Chain Management should focus on the need for integration of their supply chain. The effectiveness of the company to deliver its goods to the end user is highly dependent on the integration of its linkages between their partners. A company can no longer compete effectively on its own but with support and integration with its downstream partners also. Supply Chain integration is a process integration of upstream and also downstream activities through a medium or platform interconnecting each other. With the rapid development of ICT, the process of integration has become much more easily compared to the past.

In the past, in the buyer-supplier relationship, the buyer will usually reduce the cost of purchased materials through aggressive negotiations. This usually bring to a win-lose situation whereby the supplier profit margin have been reduced drastically to meet the demands of the buyer. With supply chain integration, this is no longer the case. In a win-win situation, the buyer and supplier are in the form of strategic partnership. The approach is taken based on mutual benefits and continuous improvement on both sides. The approach is also less aggressive and commands the respect of each supplier. Each negotiation that occurs in this approach is done with focus on quality as the priority and follows by the cost.

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Example of a local Malaysian company that integrates their supply chain is the Malaysian car automotive car maker, Proton. After Proton suffers negative growth in the last few years, the new management of Proton has decided to integrate its supply chain and reduce their vendor based from 260 vendors to only 20 to 30 vendors only. Proton's logistic provider companies have also been reduced from 14 companies to 3 companies only. The objective of the reducing was simply to cut waste and minimize the transaction that does not add value to the company. Reducing the vendors has helped Proton to cut the cost of the car they are selling and with higher quality.

Integration of Supply Chain

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