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Supply Chain Integration
Part 2 of 3

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There are seven essential supply chain components or activities:

1.        a process in place for determining the ultimate consumer needs

2.        a process in place to design products to satisfy those needs

3.      a process for stimulating demand (branding, pricing, displaying, merchandising, etc.)

4.      process for managing materials

5.        process for producing product

6.        processes for warehousing and moving product to right location

7.        a financial process to help in risk taking/management


Figure 2 shows a simplistic five-step example of how an integrated supply chain works. We have gone through the seven steps outlined earlier and have developed the consumer need, designed/developed the product, stimulated need, and put in place all the other processes needed to get the "stuff" from dirt to the customer's shelf.

1.        Customers purchase the product.

2.        Demand gets communicated throughout the chain as required.

3.        Sourcing has been done for our primary suppliers and our suppliers' suppliers, and now the demand is being communicated throughout the chain as required.

4.        We will make or assemble to demand to replace the product taken off the shelf at each step in the chain as required based on the com­
municated demand.

5.        We will move product to the nodes in the chain as required based on the demand communicated.

The top arrow shows the flow of materials from "dirt" to the ulti­mate consumer. While this is occurring, cash is flowing in the other direction, the second arrow, to pay for the value-added benefits that are accruing in the supply chain. The arrow on the bottom makes refer­ence to the multidirectional flow of information that is necessary to assure proper operation of the supply chain. For those of you familiar with the "plumbing chart" in MRP II, the flow of net requirements down the chart was originally revolutionary in its day, but when the feedback loops were added, the concept of MRP II became the power­ful tool that it is (if used properly).

We have covered this material in an extremely simple fashion. I suggest reference be made to the SCOR model that can be accessed on the web at

The principles as you can see in figure 1 are simple: source, make, deliver with planning as the glue that holds it all together. As our sup­ply chains grow, the complexity goes up exponentially. Figure 4 shows that well.

Successful supply chains have three major elements:

1.        ownership—there is a vested interest to make it work. One should select companies with similar values to partner with in the creation of the supply chain.

2.   collaboration—in today's world it is difficult to own it all. There is
a need to collaborate with others to create this seamless supply chain to guarantee success.

3.        invest/reinvest into information technology (a) in tools that decide what, where, when, and how much to buy, make, move, sell and then have the capability to measure the processes; (b) in knowedge, people, skills and learning—change will always be with us. Collaboration demands a coach for optimization and integration.

Fortune in 1994 stated that in the very near future competition will not be company against company but supply chain against supply chain. And let the best supply chain win!

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 11

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