Process approach to supply chain integration

Abstract

PurposeBusiness renovation, the effective utilisation of information technology and the role of business process modelling and simulation, are all vital in supply chain integration projects. This paper aims to show through a combination of these methods how the performance of the supply chain can be improved with the renovation and integration of processes at various tiers in the chain and by the sharing of information between companies.Design/methodology/approachSimulation‐based methodology for measuring the benefits of the creation and renovation of business process models combines the methodology of developing process models and its simulation with the simulation of supply and demand. A procurement process in the oil/retail petrol industry is examined in a case study.FindingsUsing the proposed methodology, different business process models can be investigated and simulated. The benefits for each company involved in the presented case are substantial and can be estimated through a simulation. Substantial benefits in costs, quality and lead times were identified, however, their distribution is not symmetric. Inter‐organisational IS and applied technology were enablers for supply chain integration. However, organisational changes and new business models were prerequisites for obtaining those benefits.Practical implicationsThe process approach to supply chain integration presents a mechanism that can be applied to any industry. It represents a systematic methodological business renovation approach involving cost cuts, quality improvements and lead‐time improvements. The costs of supply chain integration projects were not studied. The benefits should be measured against the cost of testing the economic feasibility of such projects.Originality/valueThe effective utilisation of business process modelling and a simulation of the necessary business renovation are shown. The novel combination of business process and demand/supply simulation enables an estimation of changes in lead‐times, process execution costs, quality of the process and inventory costs. Although the methodology is presented through a case study of the oil/retail petrol industry, it can also be used to estimate the benefits and monitor supply chain integration projects in other industries.

Managing supply chain integration: contemporary approaches and scope for further research

“…Business process modelling using simulation helps achieve SCI through the renovation of every aspect of the processes and effective information sharing (Trkman et al 2007). Childerhouse and Towill (2003) show that material flow holds the key to SCI.…”

The impact of business analytics on supply chain performance

“…Effective supply chain management ('SCM') has therefore become a potentially valuable way of securing a competitive advantage and improving organizational performance [47,79]. However, the understanding of the why and how SCM affects firm performance, which areas are especially important and which are the important moderator effects is still incomplete.…”

Towards Improving Supply Chain Coordination through Business Process Reengineering

“…However, the formation of a business model and utilisation of information is also crucial. Information should be readily available to all companies in supply chains and the business processes should be structured so as to allow the full use of this information (Trkman et al, 2007). One of the objectives of this chapter is to offer insights into how the value of information sharing within a two-level supply chain is affected when two different models of business process reengineering are applied.…”

“…The main cost drivers are therefore: number of stockouts, stock level at the petrol station and process execution costs. Lead time is defined as the time between the start (measurement of the stock level) and the end (either the arrival at a petrol station or the decision not to place an order) of the process (Trkman et al, 2007). The main problems identified when analysing the AS-IS model relate to the company's performance according to local optimisation instead of global optimisation.…”

“…A mere increase in information transfers does not mean that information distortions (Bullwhip Effect) will be avoided and the efficiency of logistics processes will be improved. The business models of existing processes have to be changed so as to facilitate the better use of the information transferred (Trkman et al, 2007). In this chapter, by using business process modelling and simulation we show how achieving only successful business process changes can contribute to the full utilisation of improved information sharing, and so to the full coordination of the supply chain.…”