Saturday, May 1, 2021

Vertical integration supply chain

Vertical integration is “the degree to which an organization owns the network of processes”. It means some companies, owning nearly the entire supply chain, from design and production, to distribution and logistics, to stores worldwide.

Supply chain integration involves information sharing, planning, coordinating and controlling materials, parts and finished goods at the strategic, tactical and operational levels.

The objective for this integration can involve acquiring a firm that is closer to the source of supply or to the ultimate consumer.

Vertical integration benefits companies by allowing them to control processes, reduce costs and improve efficiencies. Downstream integration plays an important role for manufacturing firms in several ways.
*First, it can help firms to secure the distribution channels of their products, especially in markets with increased uncertainties
*Second, it can offer a way to control efficiency gains and cost reductions in the supply chain
*And third, downstream markets can offer important benefits in addition to large new sources of revenue.

This type of integration involves the coordination between businesses located at different stages of the supply chain. Customer integration and supplier integration are major instances of vertical integration.

The cost of integration is a loss of flexibility in choosing the most suitable suppliers for a particular final product.
Vertical integration supply chain

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