Process approach to supply chain integration

Abstract

Purpose Business 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/approach Simulation‐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. Findings Using 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 implications The 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/value The 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.

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