1.0 stated that high level of SI

1.0          
Introduction

Supplier integration (SI) defined as strategies used by
parties between the suppliers and manufacturer cooperated in order to create
value by few activities such as supplier selection, supplier performance and
supplier relationship.(Danese 2013) Many researcher stated that
high level of SI have many of positive impact toward the business growth over
many years ago. (Perols et al. 2013) According to Martinsuo and Ahola (2010), SI consists wide range of
affection that bring benefits and disease whereas increase the business
performance, reputation and financial improvement while if SI cannot manage
wisely it will lead to profit lost and linkage of supplier.

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On another hand, the different of the integration activities,
the performance appraisal or measurement must flexible according to the
different manufacturing firms and suppliers. While from some researcher argued
that measurement or appraisal of SI as an organisation only few. As most of the
researcher needed to know when SI in the procurement management is a must.(Igarashi et al. 2013, Lau 2014) The main reason to do that is
due to the manufacturer has to analyse and discuss how to manage the SI
activities in order to enhance the business growth. Hence, the relationship
between the manufacturer and supplier should be perform harmonies and preserve
the business growth and extend the business.

Therefore, SI has become a very important strategic nowadays
to the business performance while SI is one of the significant role to reduce
cost and improve the quality developing strategies for supplier in order to
improve their management and increase both business growth.

1.1 Scoop and Objectives of Research Paper

The main objectives of the research paper is to evaluate the
supplier integration in an organisation’s procurement department in order to
contribute to business growth. This paper will evaluate the SI activities
include supplier selection, supplier performance and supplier performance on
how they contribute to business growth. Basically all the data collected from
the supplier integration in the manufacturer and some of the researcher on
evaluate the SI.

 

2.0 Literature Review

The paper indicates that supplier integration activity in a
procurement department as well as relates business growth and development.
Supplier integration (SI) is defined as strategies used by parties between the suppliers
and manufacturers cooperated in order to create value by few activities (Danese 2013)such as supplier selection,
supplier performance and supplier relationship. Cooperation with suppliers
obviously will directly affect on the business growth due to resources and
information by suppliers given.  In the
SI activity research, according to the activities bring out by manufacturer can
easily reduce cost while increase the business benefits. Wu et al. (2010) stated the main purpose of
implement SI activities is to run the procurement process smoothly thus SI
usually bring out by manufacturer. The SI operated by manufacturer or supplier
distinct between article and journal.

Getting
Performance from Suppliers

Lin et al. (2013) comes out a framework on help
manufacturer have the ability to improve the quality of product with the
current suppliers or future suppliers. The frame work contains research method
and developing supplier strategies in order to increase the performance on
business growth. Procurement department usually claimed that the employing of
performance feedback is able to evaluate the suppliers. These imply the
suppliers to fully commit in the progress. Evaluation for supplier is to give
the opportunity to suppliers to promote the improvement and make sure the
developing strategies use is correct and relates.(Sillanpää et al. 2015) In order to prevent from
profit loss or waste, Tseng (2014) stated risk planning comes
first before all the SI activities implement. Therefore, the supplier can
complete the task in a timely manner and good quality in this way, performance
evaluation is needed while the improvement and developing strategies necessary
implement.(Hajmohammad and Vachon 2016) Hence, SI distinct by
different context and different level of SI can take place by different
organisations and their suppliers.

The relationship
perspective

From a relationship perspective, the overall relations
between the manufacturer and suppliers mainly due to ensure the quality of
product will meet the expectation as well to minimize the operation costs and
waste. According to Kim and Choi (2015), partnership between manufacturer
and supplier is a short term and limited form. The relationship of both parties
based on the mutual trust, understanding and benefits in order to increase both
parties business growth and performance. Moreover, there are few studies Roden and Lawson (2014, Lin and Chang (2012) prove that once the
partnership extended to partnership in long term cooperation, it will help in
the future collaboration and increase the profit. Supplier relations can
facilitate the SI activity to implement smoothly for the future and increase
profit in order to increase business growth

2.1 Supplier Selection

Supplier is a significant role in the supply chain while
supplier is the very first step in the chain. Many researchers stated
manufacturing always come first in satisfactory of suppliers due to surrounded
with competitive forces to provide the raw materials and services with standard
quality, reasonable price and delivery faster.(Li and Zabinsky 2011) Therefore, supplier selection
has been a major research during last time. Supplier selection, one of the SI
activities is typically known as a major challenge for the procurement
department, whereas few consideration should be taken into consideration which
criteria decision making with standard qualitative and quantitative in order to
increase the company benefits and profits.(Nair et al. 2015) In order to increase the
company performance, procurement department has to stand on the company
position to deal with the supplier to obtain the right product with standard
quality and standard price of course at the right time. Supplier selection
required to do a wisely decision making and choose the right suppliers to
preserve the company’s benefits which is to reduce the cost due to purchase the
wrong but also strengthen relationships with the suppliers to get win-win
situation.(Rezaei et al. 2014) However, according to Lin (2012), it mentioned there is always
a bug in the supplier selection which is cooperation with supplier who know the
company as a guaranteed customer will not put fully effort or fully concern in
the business. In order to prevent the occurrence of this kind problem, company
required to set an entire and detail policies and terms and condition to make
sure the business growth as well.(Omurca 2013) By making a correct supplier
selection, it will lead to a satisfaction to the purchaser.

2.1.1 The Supplier Selection Criteria

As what mentioned in the last paragraph, supplier selection
is a difficult task may lead to fatally causes which lost control of supply
chain and lose of end customer. According to Pal et al. (2013), price given and offering
higher price on the sourcing out suppliers with standard quality is the main
idea and reason to select suppliers on the last time. Nowadays, in order to
select the best of the best supplier according to the company requirement, Kim and Wagner (2012) state the right decision
between obvious and inconspicuous factors as a consideration in supplier
selection. Obvious factor is the total costs of a finished goods reflect on the
whole supply chain which include material and labour cost to inventory cost
that occur in the whole process of supply chain. Inconspicuous factor include quality,
services provide, the reputation of the brand and flexibility in qualitative
factors as a measurement in order to search out the most suitable supplier.(Karsak and Dursun 2014) However, according to Lima Junior et al. (2014), from 2000 to 2011, found
that data envelopment analysis is the most popular method in supplier selection
after studied sixty over journals and conferences. Therefore, the decision
making of supplier selection depends on what type of manufacturer and what type
of services and goods needed.

2.2 Supplier Performance

Supplier performance are increasingly efficiency because of
the manufacturing firms focus on their core ability and allocate to suppliers
the design, enlargement and creative in thinking aggressive, more advance
standard and subassemblies in order to enhance business growth.(Autry and Golicic 2010) Moreover, manufacturer must
have the capability to collect the buyers respective of the market, so that
manufacturers understand their supplier improvements in the areas of the
quality and delivery. According to Jean et al. (2012), there are a few discharge companies
must handle to ensure the precision and fairness in their performance system.
Manufacturer must move forward a great program to track supplier performance,
its need to make sure manufacturer has set the policies while suppliers follow
it. Hence, by knowing suppliers’ abilities and conference is a way to deal with
the suppliers and the result shows that its can improve supplier performance
impressively and the communication between the suppliers and manufacturer need
to be openness and honest. (Akamp and Müller 2013)However, according to Sundtoft Hald and Ellegaard (2011), found the two most
significant measures of the supplier performance are delivery reliability and
security, for example delivery accurate. In the term of the delivery service
the supply management organisations must measure out the companies and the way
to advance their company to success. Supplier performance must be securely
defined and communicated well with the supplier.(Terpend and Ashenbaum 2012) At last, the quality and
delivery precision performance can be concluded by dividing the total of the
lots and products received at the defined delivery schedule by total lots or
products received.

2.2.1 Research on Supplier

The SI activity includes performance feedback. Performance
feedback is a significant role of the supplier performance improvement process
by every experienced top management. The improvement process can be observed
and monitored through a framework.(Igarashi et al. 2013) The framework must be
reliable and keep on monitoring the process.(Wu et al. 2010a) Besides, obviously with the
feedback without the framework, this cannot get any improvement from it. On the
contrary, performance without feedback is barely satisfied due to there are no
improvement in the supplier effort. According to the research study by Roseira et al. (2010), the most efficient way to
improve the supplier performance is collaboration between the internal
procurement department and the suppliers in contemporary organisation. In order
to increase business growth, the internal procurement department have to
communicate with the suppliers due to nowadays suppliers will directly affected
on few dimensions for example flexibility, the costs, delivery and profit.
However, Soh et al. (2016), Ho et al. (2010), Prajogo et al.(2012) indicated more than 65% of
suppliers may not meet the expectation of manufacturer without collaboration of
manufacturer. A study of 300 manufacturers conducted by Wagner (2010) stated that 75 percent of the
respondents they will do the performance appraisal regularly while 25 percent
of respondents will do once or twice a year. Most of the companies evaluate
their suppliers in some way but most of the time it must depend on the services
and product provided to decide what the method to do in performance evaluation.
By the survey it did by Tsai et al. (2012), it can be conclude the best
way to evaluate the supplier performance is the performance feedback.

2.2.2 Changing Supplier Developing Strategies and Performance

In order to increase the business growth, manufacturers
provide strategies for those suppliers to improve the supplier performance. The
strategies used are incentives or reward to supplier for performance
improvement or impetus, competition among the suppliers and intervention of
manufacturer by providing classes or talk of supplier personnel.(Wagner 2011) According to Shahzad et al. (2016), internalized supplier
development and externalised supplier development are two main categories of
supplier development strategies. Internalized supplier development strategies
is manufacturer directly resources from the supplier while externalised
supplier development strategic refer to manufacturer outsource for those supply
that not link to their core business in order to imply the supplier performance
improvement. Another study revealed by Wagner, S M (2010) that supplier evaluation and
requested to improve performance even required to increase the business
percentage often intervention by the manufacturer more than provide training or
classes and invest on the supplier operation. However, Chen (2011) stated the failure of apply
supplier developing strategic to achieve business growth due to combining the
supplier and manufacturer objectives together fail. In conclusion,
manufacturers recommend focusing on the progress of SI activities and final
result come subsequently to bring up commitment.(Sillanpää et al. 2014) Manufacturers have to
attribute to the supplier on-time deliveries and come out consequences in order
to the supplier development and performance.

2.2.3 Risk Planning

According to Talluri et al. (2010), the supplier sustainability
risk has discussed in the supplier relations lean on the stability of supplier
performance. The risk is mainly scope at the reputation and performance
perspective. The supplier risk briefly defined as the supply and reputation
risk bond together from environmental to social performance. According to
research reveal by Ruiz-Torres et al. (2013), Leppelt et al. (2013),
Neumüller et al. (2016), supplier sustainability risk been monitoring by
the social according to the supply chain management and the performance
improvement that face to the industry. Some of the researcher Bai and Sarkis (2010), Leppelt, Thomas et al. (2013)argued that the supplier risk
planning is a must due to the flexibility performance of the supplier and
unpredictable cause that bring profit lost. To conclude based on my
perspective, supplier risk planning is a must due to once the supplier faces
critical problem, the manufacturer able to manage risk with find a replacement
of supplier to take over the task. On other hand, manufacturer need to clear
and understanding what the risk facing toward the supplier, evaluate the
supplier and change their strategies developing before the tragedies happen.

2.3 Supplier Relationship

In addition to the characteristics of a supplier integration
relationship, there is a definition for the extent and scope of supplier
integration.(Tidy et al. 2016) The Supplier Integration System is also known as vertical
partnership, which is beyond the scope of buyer-seller relationship and is
different from horizontal partnership as well.(Tanskanen
and Aminoff 2015) Vertical partnership focuses on
the relationship between manufacturers and suppliers, which defines
collaboration is a subsequent organization in the supplier integration.
Vertical partnership is also characterized as sequential interdependency.
However, Horizontal partnership mainly indicates the parallel or equal
relationship between different organizations in buying or purchasing entities.
The operation type for this partnership is a one-to-many relationship, in other
words, it can be understood as one buyer against various of suppliers.(Wu
et al. 2010b) This type is quite opposite to
marketplaces orientated relationship, which is defined as a many-to-many
network. Therefore, it is not difficult to conclude that the Horizontal type is
much more beneficial to buyer.

2.3.1 Management-Supplier Relations

Partnership is distinctive from integration, which is a type
of cooperation with short term and limited form. The way to establish a
partnership is a much more formal process.(Liu et al. 2012) This partnership dominated
cooperation provides an access to enhance the integration and comprehensive
development between different entities. The term cooperation and integration
are on the equal basis and complement each other. For instance, according to Forkmann et al. (2016) stated that limited vertical
integration relationship happens in voluntary chains and in other loose form of
cooperation. Therefore, a less formal cooperation contract is more based on mutual trust, understanding and
benefit to some extent compared with legal and law dominated agreement. One
issue cannot be neglected is that elements of cooperation account for a vital
role in the process of promoting and strengthening the cooperation relationship
to avoid any losses.(Praxmarer-Carus
et al. 2013)
However, partnership and integration also have some differences in concept
level. Blonska et al. (2013) states that cooperation is the
starting point or primary level in inter-organisational partnerships. It also
occurs in a short term and less form situation. But this does not mean this
type of partnership is dependent and without identity because the existing
operation and practices remain the same without any changes. In fact, people
basically just share information. Further, it shows the variety in relationship
structures.(Wagner and Bode 2014) Cooperation can be analysed from
two aspects, first, it could become more integrated in the longer-term
relationship as a starting point or basic level. Secondly, which includes all
types of cooperation relationships between different partners as an integrate
term.

2.3.2 Developing Partnership

Relationship marketing and supply chain management have been
the main area by studied the partnerships relationship and integration. This
partnership dominated cooperation provides an access to enhance the integration
and all-rounded development between different entities.(Deligonul et al. 2013) The main reason partnering
for are sharing the information, risks and rewards. Cheng and Carrillo (2012) stated partnership is more based on mutual trust,
understanding and benefit to some extent in order to perform well in business
growth between each other. Both entities between manufacturer and supplier are
more based on dependence and mutual trust. Khan
et al. (2015) differentiate three types of
partnership which consists of short term basis, deepen their partnership bond
integrated by multiple function and the last both entities became critical and
strategic in order to help each other on the well performing of business
growth. However, according to Qrunfleh
and Tarafdar (2013), partnership is not integrated
due to what mentioned in last paragraph relative to short term and limited form
of strategic. Then second type present by Yeung
et al. (2013) insinuates is more integration
than partnership yet the integration come first on the operation level. The
third types implies for both entities played an important role in strategies
supplier and manufacturer integration in order to increase business performance
as well. Hence, strategies partnership can run well without balanced power
positions.(Friedl
and Wagner 2012) In fact, a good integrated
partnership needs a fully trust and collaboration between both entities.

 

3.0      Conclusion

Based on the abovementioned research, SI activities in the
procurement department is full of challenges and benefits bring along toward
business growth. SI activities include the supplier selection, suppliers’
performance and supplier’s relations. While not all of the SI activities bring
along benefits, SI activities is probably to occur according to different
organisation and different supplier.

Firstly, one of the SI activity is suppliers’ selection is
the major step to start in the SI activity in order to find the sourcing that
required with standard quality and delivery on time. To prevent the dissatisfaction
effect happen such as waste or cost reduction, making a correct decision on
supplier selection is very significant. While the choosing a supplier, the
manufacturer have to analyse the method or criteria in order to make the most
accurate selection. Therefore, the decision making still depends on what type
of manufacturer and what services the suppliers provide to in order to increase
the business growth and enhance the performance.

Secondly, supplier performance is also one of a SI activity
to measure the supplier improvement and result comparison. Communicate between
the manufacturer and suppliers is compulsory because interaction is significant
and without communication, the supplier will not notice their shortage. In
order to increase the supplier performance, manufacturers have to conduct the
research on suppliers. The performance feedback can improve the process through
a framework set by the manufacturer. According to a few previous researches, a
majority of the companies prefer the suppliers cannot meet the expectation
without the cooperation of manufacturer. Next, when the feedback comes back,
the manufacturers have to monitor the suppliers to do changing in supplier
developing strategies. However, by improving the supplier improvement, manufacturer
usually only mention on the consequences instead of the progress which is
training or classes given to the suppliers in order to increase the business
growth. Manufacturers consider applying training or courses to the supplier and
improving the supply progress. Last, manufacturer need to clear and
understanding what the risk facing toward the supplier, evaluate the supplier
and change their strategies developing before the tragedies happen.

 

Thirdly, the supplier relationship is also one of the SI
activities. Supplier relationship is the scope to the manufacturer on planning
to have a long term partnership in order to increase both business growth. The
management supplier relations refer to term cooperation and integration on the
equal basis and complement for both parties. In order to continuous collaborate
with each other, both parties required to put fully trust and genuineness on
the information sharing and cooperation. The partnership dominated cooperation
provides a chance to enhance the integration and comprehensive development
between both parties. Lastly, integrated partnership needs fully trust between
suppliers and manufacturers in order to increase the business growth and
development.