Elements of Supply Chain Connectivity, Integration and Coordination

Elements of Supply Chain Connectivity and Integration

Supply chain integration (SCI) can be defined as the alignment of supply chain goals and policies along with the related information and physical connectivity:

  • Alignment. Shared goals among the elements of the supply chain, often leaning at reducing their costs and improving their performance. This insures a consistency in the strategy pursued by the different actors involved. The lack of alignment often results in different investment strategies and difficulties to synchronize the components of a supply chain. Integrated supply chains have a lower risk of a lack of alignment.
  • Connectivity. Concerns the information and physical flows between the nodes of the supply chain, such as orders, tracking, inventory levels as well as the modes and terminals involved.

Connectivity usually relates to physical flows while integration usually relates to processes. The connectivity and integration of supply chains take place over several core dimensions:

  • Transport connectivity. The physical connectivity and interoperability of transport infrastructure, such as the ability to move containers efficiently along an intermodal transport chain (e.g. from ship to truck to rail). The transport terminal is the key infrastructure where physical flows are reconciled with the requirements of supply-chain management. It is thus not surprising that logistics activities are coordinated around transport terminals.
  • Commercial integration. The development of commercial arrangements, including service-level agreements and performance targets and penalties as well as the management process, such as between railways and ports (or terminal operators). It includes the elements of cost, time, and reliability as commercial goals that are benchmarked and included in commercial supply-chain decisions. Because of the numerous actors in the freight distribution, each controlling different assets, the potential scale and scope of collaborative efforts becomes a complex matrix.
  • Customs and security integration. Customs integration aims at moving goods more efficiently across borders, including prescreening and inspections. Security integration is the interconnectedness or harmonization of security procedures that protect cargo from theft, tempering or damage and protect the public from risks posed by dangerous cargo or threats posed by illicit cargo.
  • Regulatory integration. The structuring of regulations to promote a better integrated freight distribution system. Regulations should promote effective modal choice, avoid subsidized modal preferences, and favor the harmonization of regulation across jurisdictions. The promotion of standards and certification can also improve the productivity and environmental performance of supply chains.
  • Planning and funding integration. Freight transportation bottlenecks are a potentially significant hindrance to transport chains connectivity, which requires a level of coordination in the provision of investments. Institutional and finance arrangements have not adequately responded to the demands imposed by growing volumes of freight and passenger traffic and to fundamental shifts in regional and global patterns of trade. This could imply that while a private stakeholder provides investments to provide or improve a terminal facility, the public sector could be lagging behind in providing investments to better connect this facility to the regional transportation network.
  • Work practices integration. Involves organizational (managing labor as a group) and supervisory (managing individual workers) competencies. Since supply-chain management relies on the timely processing of physical flows, labor issues play an important role in this process. Automation is providing new opportunities to increase the productivity of logistics related tasks.
  • Information systems integration. The interconnectedness of information systems, including electronic data interchange, to improve management of supply chains. The setting of single window portals or port community systems is an example. These systems are being complemented by the emergence of distributed electronic ledger systems, colloquially known as blockchain.