Integrated Supply Chain Management: Exploring Its Types

Introduction to Integrated Supply Chain Management

• Integrated Supply Chain Management: Exploring Its Types.In today's globalized and highly competitive market, Integrated Supply Chain Management (ISCM) plays a pivotal role in ensuring the smooth flow of goods, information, and finances across the entire supply chain. But what exactly is Integrated SCM, and why is it so important?
• An Integrated Supply Chain can be defined as an association of customers and suppliers who use management techniques to optimize their collective performance in creating, distributing, and supporting a product. 
• In order to obtain raw materials, transform them, and then deliver them to the client, a network of suppliers, factories, warehouses, distribution centers, and retailers is called the supply chain.

Types of Integrated Supply Chain Management 

There are mainly two types of Integrated Supply Chain Management:

• Horizontal Integration:- Horizontal Integration is also divided into three types:

1. Mergers
2. Acquisitions
3. Internal Expansions

• Vertical Integration:- Vertical Integration also has three types:

1. Backward Integration
2. Forward Integration
3. Balanced Integration

Horizontal Integration:

• When a company takes over or acquires another company that operates on the same supply chain level.
• Main aim:- To grow through horizontal integration.
• Here, we can find every solution:- without changing the business model.
• Facebook and Instagram:- One of the most definitive examples of horizontal integration was the acquisition of Instagram and Facebook (now Meta) in 2012 for a reported $1 Billion. Both companies operated in the same industry (social media) and shared similar production stages in their photo-sharing services.

Advantages:-  

1. Increase the profits.
2. Reduce the costs.
3. Reduce Competition.
4. Help in expansion by market share.

Disadvantages:-

1. Complex.
2. Difficult to implement.
3. Lead high turnover.
4. Risk of failure.

Types of Horizontal Integration:-

1. Merger:- When two companies merge, two separate entities create a new, joint organization.
2. Acquisition:- When one company takes over or acquires another company.
3. Internal Expansion:- In this, a company chooses to strategically change course and apply more resources in a different way. For example:- A restaurant can expand to offer catering services.

Vertical Integration:

• When a company merges with another company operating on different levels. 
• It is a strategy to gain control over the industry (main aim).
• For example:- Apple Company, Macdonald's, Amazon, etc.

Advantages:-

1. Remove threat.
2. Long-term cost saving.
3. Easy to Implement.
4. Smooth execution.
5. Reduce transportation costs.

Disadvantages:-

1. Very costly.
2. Quite complex.
3. Reduce flexibility.
4. Loss of focus on a company's primary objective or customer.
5. Displeased customer base.

Types of Vertical Integration:-

1. Backward Integration:- A company that chooses backward integration moves the ownership control of its product to a point earlier in the supply chain or the production process.
2. Forward Integration:- A company that desires forward integration expands by gaining control of the distribution process and sale of its finished products.
3. Balanced Integration:- An approach where a company aims to merge with companies both before it and after it along the supply chain. A company must be a middleman. Eg.:- Coco-Cola, where raw materials are sourced, the beverage is connected, and bottled drinks are distributed for sale.

Conclusion

From the above analysis, we can conclude that there are two types of integration:- Horizontal and Vertical Integration. They both have their advantages and disadvantages. And it can be subdivided into further categories.

FAQs:

What is Integrated Supply Chain Management?

Integrated Supply Chain Management (ISCM) is the coordination and integration of all activities involved in sourcing, procurement, production, and distribution to improve efficiency, reduce costs, and enhance customer satisfaction.

How does ISCM benefit businesses?

ISCM benefits businesses by improving efficiency, reducing costs, enhancing customer satisfaction, and providing better risk management.

What are the main types of ISCM?

The main types of ISCM include vertical integration and horizontal integration.

What challenges are faced in ISCM?

Challenges in ISCM include technological barriers, organizational resistance, financial constraints, and regulatory compliance.

How is technology shaping the future of ISCM?

Technology is shaping the future of ISCM through automation, AI, IoT, big data analytics, and blockchain, enhancing visibility, efficiency, and security.