Internal and External Integration in Supply Chain Management

The concept of integration is broad and ambiguous, which inhibits efforts to learn from innovations. In general term Integration means disparate elements being brought together. Integrated research: concepts of connection in environmental science and policy Lorraevan Kerkhoff. In business terms how can integration have one definition when the parameters vary from one organization to the other? How can the goal be one and the same when different departments are included with different objectives? Thus, the answer may lie in Chasing the bigger aim/vision rather global objective as a team. Lambert, Garca-Dastugue, and Croxton (2005) explicitly pointed out that connectedness (i.e. connectivity) is key to integrating processes both in an intra-company context and an inter-company context. It has been observed that organizations cannot be successful unless they identify themselves as a supply chain management as a whole. Hence focus should be research on the intersection of internal and external integration. While we may dive into each process separately categorizing internal and external we may have already simplified it through the integration providers that the intersection of both is the definition of integration in a broader perspective.

Integration definition will be more effective if we look at it from a bottom up approach rather than top down approach. The process of integration can be top-down breaking a common goal into its subsequent parts but defining integration should aim for how we achieve the common bigger goal from different departments through integration. 2.1 Internal Integration Internal integration consists of traditional cross-functional management practices according to Johnson and Filippini.[2009] The authors indicate that internal integration is used primarily when the focus is on developing new products. For example, a manufacturing company may have its production department, Sales department and marketing departments using separate independent systems, and the overall performance of the company will highly depend on the coordination among these departments so that the marketing team may bring the leads and sales team can give up to date information of stock from production team which should be able to supply on demand. These processes would fall under the firm's boundary as internal integration.

Lambert, Garca-Dastugue, and Croxton (2005) explicitly pointed out that connectedness (i.e. connectivity) is key to integrating processes both in an intra-company context and an inter-company context. They argue that connectivity is crucial regardless of whether the focus is on transactional efficiency or relationship management. Sales & Operation(S&OP) plays a major role in internal integration as S&OP can also be described as a form of internal collaboration, in which a cross-functional team reaches consensus (Slone et al., 2013). S&OP is frequently enabled by enterprise resource planning (ERP) systems (Affonso et al., 2008) in conjunction with other advanced planning systems +( Jonsson et al., 2007) that are used as tools to co-ordinate the supply chain.

As Goh Stephen Eldridge [2015) pointed out S&OP should not be viewed as a standardized tool but rather should be tailored toward the specific objectives of organizations, be it reducing lead times or reducing inventories. Sales and operations planning (S&OP), and information systems (IS) would facilitate stable production, shorter lead times, higher forecast accuracy, lower inventory and distribution costs Internal Process integration through ERP systems. 2.2 External Integration However, the complexity of business processes must be acknowledged. Business processes can vary significantly in terms of level (strategic or operational process) and scope (activities involved in a process). SCM itself, in fact, can be considered a business process. Hence it is crucial to identify important processes without losing focus.

Now, changes in service levels, safety stock settings, lead times, transportation modes, and order parameters can drive large swings in order patterns Manufacturers need visibility into retail order strategy parameters to better predict future time-phased orders coupled with store-level forecast collaboration to move to a shelf-connected supply chain model. As pointed out byFred Baumann[2010[5]] some of the most common out-of-stock root cause identifiers include the following:-Phantom/ghost inventory where perpetual inventory found in the retailer's system is likely to be inaccurate-Inappropriate ordering parameters-Inaccurate demand forecasts-Insufficient shelf-space allocation due to promotions or seasonal demand-Shelf distribution driven by poor in- store execution Manufacturers that can identify these out-of-stock situations and dynamically adjust forecasting and replenishment parameters via collaboration with their retail partner. Here comes the need for external integration.

External integration will lead to the company's identity as a supply chain itself and allow them to supports the connectivity and simplification requirement across the supply chain strongly because the aim is to keep a common structure understandable by all through simplification and also connectivity to integrate in permissible ways for different entities which will help to preserve connectivity without destroying privacy.Baumann also pointed out that these days companies have exponentially more data that have to be consolidated into one format that can be easily digested and acted upon. Solutions need a meta-data management lay that features mappings and common data definitions for business unit, product geography, etc., to help facilitate this process. Plus, with the increase of partners from emerging markets, companies need to be able to consolidate data with varying degrees of sophistication and different time.

Difference between Internal & External Integration

The crucial part is to understand the boundary of internal and external integration. To understand the difference between internal & external integration the impact areas needs to considered. External process integration: External supply chain facing environmental factors that can affect direct and indirectly on the supply chain. They can be due to political reasons, economic, technological or geographical (Kleindorfer& Saad, 2005). Criteria used to external supply chain include: supplier failure, supplier quality problems, oil crisis, malfunction of ITsystem, accident (e.g.fire), natural disaster. Internal Process Integration: Internal supply chain risk caused by problems in organizational boundaries include such as faults of machines or problems related to information technology (Rice &Caniato, 2003).

Criteria used for internal supply chain are: machine breakdowns, import or export restrictions, transportation failure, delivery chain disruptions, increasing customs duty, change in customer demand, technological change, increasing raw material prices. [Shahram Gilaninia1 , Hossein Ganjinia2 , Batool Asadi Mahdikhanmahaleh3]. It has been observed that the impact of external integration has a greater effect than internal integration. If one can look at the process of integration from bottom up approach the internal integration forms the basis of external integration which in turns forms the foundation as a supply chain ensuring end-to-end process flow in time from supplier to customer. Hence both integration may have different boundaries and impact areas but in order to achieve the common objective both processes needs to strengthen each other.

Strategic Importance of Integration

Bose Corporation's successful process integration provides a great example—one key step is focusing on creating common policies, guidelines, and methods for expanding improvement efforts within and between functional areas, in order to achieve simplified processes (Segars, Harkness, and Kettinger 2001). Supply chain simplification also manifests in other formats such as joint planning and decision-making. As a strategy Bose Corporation has focused on transforming itself into a customer driven organization, which essentially means that the company wants to create customer value through products manufactured based on customer preferences. With measures like certificate of achievement form and supplier performance system the company has ensured that the goals of all the external stakeholders are aligned with its objectives of having high service level, quality and technical innovation.

Similarly, from Dell direct model, it can be observed that It is not just that Dell sells direct, it is also its ability to forecast demand -- it's both the design of the product and the way the information from the customer flows all the way through manufacturing to suppliers. It is this kind of coordination of information that facilitates Dell to manage such lower level of inventory. The model relies on the demand-side pull rather than supply side push i.e. not even a single computer is produced unless there is corresponding demand in the marketplace. This avoids the massive queues of inventory usually sitting idle within retail stores, distributors, and factories.

Requirements for Internal and External Integration

Internal and External Integration will result in forming an integrated supply chain in simple words a supply chain which is well integrated with suppliers as well as customers ensures a smooth business flow. In modern business scenario Supply chain has become the back bone for every business organization. All supply chain partners are joined together in value delivery network of company that no one can perform better without support of other. The ultimate objective of this cohesive relationship is to deliver value to customers and gets desired state of customer satisfaction & loyalty for the organization. For this purpose, it is necessary to integrate the internal and external partners of Supply chain at different levels. The Purpose of the paper is to investigate the impact of supply chain integration on supply chain performance. [Levels & Barriers to Supply Chain Integration: a Conceptual Model of Supply Chain Performance-International Journal of Management Science and Business Administration Volume 1, Issue 1, December 2014,] It was observed by Cornelia Drogea, *, Jayanth Jayaramb, Shawnee K. Vickerya that where as Internal integration may have direct impact on company's financial performance and responsiveness, external integration impacts directly company's market share as shown in the figure. The arc of integration [Markham T. Frohlich London Business School] also shows the requirement of internal and external integration in business.

Manufacturers can now link to customers using e-commerce on the sell-side of the Internet in what is popularly termed the Dell direct model. The more information that manufacturers have concerning end consumer's requirements the simpler supply and demand decisions become (Poirier, 1999) and the lower the risks of stockouts or obsolete inventory (Fisher and Raman, 1996; Metters, 1997). The outward-facing supply chain strategy is associated with the largest rates of significant performance improvements.

There is a category of vendors on the rise in the API space; Integration Platform as a Service (iPaaS). The term is fairly new but in layman's term Integration Platform as a Service (iPaaS) is a cloud service which allows user to control integration flows connecting any combination of on-premises and cloud-based processes, services, applications and data within individual or across multiple organizations[Janet Wagner,2013].

After evaluating the different forms of integration, it can be said that the supply chain management works at the intersection of internal and external integration and in order to manage both iPaaS is on the rise. These integration providers synchronize inside and across organization data and processes through automated workflows and alert mechanism. It even incorporates Rule engine and actions based on conditions making the supply chain management system extremely responsive and flexible. These platforms work hard on finding a standardization of all business processes making it ideal for anyone to access their required information in ideal format in secure and permissible ways eliminating hazards of keeping track of internal or external integration individually. Within the S&OP process, there's accidence and order to the activities that must occur and a level of coordination required among stakeholders. As companies deploy an integrated S&OP framework, the number of steps and coordination of activities across these functions and resources will increase.

By using automated workflows and alert mechanisms, critical decisions can be elevated to the appropriate stakeholders, ensuring that the company continues to achieve its goals and objectives by operating according to plan.