How important is it to tightly link and integrate the different functions of your business’s supply chain? As it turns out, it might be more important than you originally thought. According to a new study from the Global Supply Chain Institute (GSCI) at the University of Tennessee, Knoxville, businesses who make sure to integrate their operations consistently achieve better results.
The IBM-sponsored report – “Bending the Chain: The Surprising Challenge of Integrating Purchasing and Logistics” – observed businesses across a broad industry range as well as size range from $20 billion to $100 billion. The study found that many businesses are still keeping different divisions of their operations separate, down to having separate budgets:
“This research suggests that some of the silos have stubbornly persisted,” GSCI supply chain executive Mike Burnette told Supply Chain Management Review. “This is particularly true with regard to supply chain integration and especially the connection between purchasing and logistics functions. Some companies even still have separate budget lines for the two, which was surprising to me; I didn’t think anyone did that anymore.”
The study found that these businesses performed below their expectations; meanwhile those who reported the best supply chain responsiveness and the least amount of lost time and product were those who also reported the strongest integration of end-to-end supply chain operations from purchasing and order management to warehousing and transportation. All of this suggests that integration is vital to moving your business forward:
“The best case scenario is that stakeholders in each area all report to the same person and work with common metrics, vision and culture,” Burnette added. “It should all roll up to the same scorecard.”
Of course, this isn’t always easy to achieve on a short schedule. But until operations can be more strongly and permanently integrated, the study suggests having the heads of your different supply chain operations meet and map out a set of common best practices metrics. This can at least ensure that everyone is on the same page.