What? Integrated Supply?

These days we see a growing trend towards ‘Integrated Supply’ in the industrial sector. But what is it actually? Why is it necessary? And can it deliver a more robust, coherent and improved approach to the procurement and supply of goods and materials, especially in the ‘tail spend’ categories?

The term ‘Integrated Supply’ has been used for over 40 years, chiefly in the US, with many shades of meaning (one US distributor has nine different definitions of Integrated Supply in its literature!). For an academic definition, The Logistics Institute at Georgia Tech suggests “The Integrated Supply chain is one that has full responsibility across the corporation (including different divisions, business units and geographies) for the planning and management of all activities involved in end-to-end supply chain processes including sourcing and procurement ... and all logistics management activities.” So ‘Integrated Supply’ is about creating a single, uniform system to procure goods of all kinds. In such a system, sourcing and purchasing, storage and delivery, are planned and executed as a seamless business process. It works across multiple sites, multiple production and product lines and multiple users (for example, combining the requirements for building to customer orders and for building to spare part stock).

The result is a supply operation with a single set of strategic business objectives and policies. It is synchronised across the different physical processes. It works to KPIs which are optimal for the organisation, not for individual ‘-departments’, and it promotes long term internal and external collaboration.

‘Integrated’ here is not necessarily synonymous with ‘outsourced’, but as we will see, for both MRO and BOM ‘tail spend’ this is often the most effective approach.