5 Key Stats About Supply Chain Integration
Brian Hoey - September 03, 2020
One of the ideas behind Industry 4.0 is the creation of the so-called global factory, in which production networks around the world are so intimately connected that the boundaries of the traditional factory floor cease to be terribly meaningful from a production planning perspective. Of course, to make this a reality, you also need a global logistics chain that connects the different production plants to one another in a visible way. By the same token, you need shared—or at least interoperable—software solutions across manufacturing outfits, just as you need tools for planning and coordination that are more sophisticated than what the majority of businesses currently use.
In other words, you need comprehensive visibility into the integrated supply chain. Logically, in order to achieve that goal, you need to have an integrated supply chain in the first place. After all, you can’t gain visibility into something that doesn’t exist—which means that supply chain integration is a necessary prerequisite to more robust forms of digital transformation in the supply chain. This raises a couple of questions: how exactly does integration add value, and what is the current state of integration across the supply chain? Hopefully, these stats will shed light on both of those topics.
1. According to reports, fully integrated companies outpace other businesses by 20%.
This can be for any number of reasons, but this report in particular alludes to the ability of an integrated supply chain to increase connectivity across the value chain and thus speed up decision-making. Simply put, when you have more information at your fingertips, you can choose the optimal decision more of the time—it’s the reason Sherlock Holmes always used a magnifying glass, and it’s why businesses up and down the supply chain are adopting technologies that can make potential planning options glaringly obvious. Once these systems are in place, you can make data-driven decisions in the moment, whether you’re choosing the right way to reroute a shipment of goods that’s encountered a bad traffic pattern or how to adjust volumes from your supplier to optimize capacity for future orders.
2. Companies that switch from pen-and-ink inventory systems to more integrated systems see 25% gains in productivity.
That’s on top of comparable improvements in use of space and stock. This stat should really hammer home the idea we outlined above: that supply chain systems that work together with one another, rather than operating in silos with no connectivity, yield better results all around. They give you opportunities to optimize that would have been inconceivable with smart, digital technologies, and they help create the kind of visibility you need to approach Industry 4.0-readiness. For inventory management in particular, this might take the form of a system that both notifies inventory planners when stock of a particular unit is running low and sends them notifications when production planners finalize production runs. In this way, inventory planners can constantly balance emerging demand for parts with the leanest possible stock levels—resulting in cost savings and new efficiencies.
3. Nearly 70% of companies don’t have full visibility into their supply chains.
Okay, so far we’ve seen some of the ways in (and the extent to) which integration can add value and help empower smarter planning, production, and shipping. But is this kind of value-additive integration common across the modern supply chain? Not exactly. To wit, a significant majority of supply chain businesses still fall well short of the dream of end-to-end visibility—in spite of the fact that it’s often a high priority, and we’ve seen all of the value that it can bring. So what gives? Why is there such a significant gap between priorities and execution? Well, the simple fact is that achieving visibility by way of supply chain integration is easier said than done: it requires you to gain a comprehensive overview of your existing data streams, processes, and IT infrastructure; it requires you to adopt solutions that will reduce silos and remove shadow IT; and it necessitates clear alignment between different departments on both an operational and a technological level. Unfortunately…
4. …more than 60% of manufacturers struggle to share information between departments.
Like we’ve seen above, sharing information between, say, production and inventory planning is crucial to creating unified, end-to-end strategies that help power cost optimizations for both functions. But, too often, the inventory team has its own IT, and the production planners have theirs, and never the twain shall meet. The result is that when raw materials move in and out of inventory, there’s no way for inventory planners to know whether they’re stocking the right items at the right levels until a disruption occurs. By the same token, production planners who aren’t getting data from their counterparts in inventory won’t be able to say which production runs can actually be completed with the parts on hand. The result is that optimal production plans can never be achieved. This tends to be, at least in part, a technology issue (both teams are using IT that isn’t operable with the other’s)—but underlying that technology problem is an organizational problem, i.e. visibility between touchpoints simply isn’t being prioritized.
21% still send information via fax machine.
All that being said, some integration hurdles really are about the technologies being used. If, for instance, you’re still using a fax machine to send information between departments, it strongly suggests that you don’t have the IT infrastructure necessary for true integration. Successful integration, and by extension successful end-to-end visibility, relies on digital technologies—often cloud-powered ones. Not only that, but it depends on your ability to connect your digital technologies in a way that makes data legible and accessible to users, with the potential for analytics and AI integration on large caches or streams of information. Simply put, a fax machine can’t offer that. An Excel spreadsheet can’t offer it either. Neither can pen and ink. Long story short: to truly reap the many benefits of supply chain integration, you’ll have to continue your digital transformation and adopt the right technologies.