Links should be established with second-tier and third-tier suppliers; their key capabilities should be mapped; and their deficiencies should be identified and addressed. Investments in targeted supplier development and integration can result in substantial reductions in product development and order cycle times, as well as improvements in quality and on-time delivery.

Substantial benefits can be realized by including suppliers in the product design process, which may involve new and uncomfortable relationships for many companies. Overcoming these problems will require strong executive support and employee training. Strong, active supplier roles and open sharing of information on the development team will be essential for achieving project goals. Concerns about protecting proprietary information can be addressed by formal confidentiality or nondisclosure agreements.

With increased reliance on sole-source suppliers and expanded levels of supply chain integration, the pressure on each supply chain participant to consistently meet its commitments increases. Replacing unreliable members of highly integrated supply chains and rebuilding required levels of trust and knowledge can be an expensive and painful process.

INTEGRATION BY FUNCTION

Many companies approach integration on a function-by-function basis, focusing first on functions for which integration offers the highest returns. Although the focus differs from industry to industry, inventories, procurement, inbound logistics, manufacturing operations, and distribution of products and services are the functions most frequently integrated. All-inclusive approaches encompass functions ranging from raw materials extraction through manufacturing and distribution to the customer and back. A ''closed loop" approach includes asset stripping and the rework or recycling of products returned by customers.

A well integrated supply chain must be open to "functional shiftability" (i.e., the assignment of functional responsibility to members of the supply chain best positioned to perform those functions at the lowest overall cost or in the shortest cycle time). Realignment of such activities within the supply chain should be reflected in a commensurate shift in benefits and risks.

INTEGRATION BY PROCESS

The effort required to identify key functional activities and their interrelationships has caused many companies to change from integrating and managing supply chains by functions to integrating and managing



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