Best Practices for Supply Chain Integration

Does the idea of universal supply chain connectivity seem elusive to your company? Here are some best practices that can improve your odds.

Nothing resonates more strongly with large companies that have hundreds or even thousands of suppliers than the concept of supply chain integration. True integration, often called universal supply chain connectivity, can result in constant improvements in the breadth and depth of the electronic interactions with suppliers, which can ultimately mean increased profitability.

Building this universal connectivity can take multiple forms. Though many members of the Fortune 1000 have already significantly integrated with their tier-one suppliers, universal connectivity could mean extending that integration to the small and mid-sized, or second and third tier, suppliers. Or it could mean deepening the level of integration with suppliers that are already electronically enabled by adding new transaction sets or even collaborative business processes to the current platform.

Either approach can deliver substantial savings related to decreased manual labor, inventory, logistics and other supply chain efficiencies. In addition, increased customer satisfaction and a healthier bottom line are certain to be natural by-products of any integration effort. Many companies estimate that increased supply chain efficiency saves millions per year.

To be honest, the idea of universal supply chain connectivity is one that has been floating around for several years. In fact, the original vision of electronic data interchange (EDI) certainly had such a concept in mind, as have the more recent phenomena of Web services, eXtensible Markup Language (XML) and SOAP. So why aren't we closer?

To achieve total connectivity, the real answer has more to do with psychology than technology. Tough as the technological challenges may be, the real issue is convincing suppliers to participate in an electronic integration initiative when and how you want them to.

To make this integration process worthwhile, businesses must maximize supplier participation without disrupting their supplier relationships. That means treating each supplier as an individual entity as opposed to a commodity. It also means giving suppliers some freedom when it comes to the technology option that works best for them while offering the help they need to get set up. Smaller suppliers in particular need special attention because using an electronic solution means a change in behavior from the status quo of the fax machine. At organizations where a cooperative attitude toward suppliers, and the subsequent individual attention, is firmly in place, the odds of a successful supplier integration effort are considerably higher.

What Works

In addition to fostering the attitudes mentioned above, there is also a three-pronged set of best practices for supplier enablement that can help companies avoid the horror stories of failed integration attempts, angry suppliers and a combination of low or slow adoption rates.

The first practice has to do with process, specifically a non-exclusive process. A non-exclusive process looks at enablement from the supplier's perspective and includes a heavy dose of planning and project management. Think of this practice as getting the proverbial ducks in a row by developing exact technology guidelines and specifications upfront, while remembering to give suppliers the freedom to integrate using whatever method they want. The only caveat, of course, is that they must comply with the guidelines. Interestingly, successful enablement programs often result in as many as half of the suppliers testing a solution they already have that happens to measure up to such guidelines. However, remember that even suppliers whose existing solutions don't make the mark should be able to choose how they want to become enabled.