Sage-Tips

What is horizontal and vertically integrated supply chain?

Horizontal integration is when a business grows by acquiring a similar company in their industry at the same point of the supply chain. Vertical integration is when a business expands by acquiring another company that operates before or after them in the supply chain.

What is horizontal integration in supply chain?

Horizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain. A company may do this via internal expansion, acquisition or merger. The process can lead to monopoly if a company captures the vast majority of the market for that product or service.

Why do companies use vertical integration?

Vertical integration helps a company to manage and control various aspects of the production, distribution, and sales processes. The goal of vertical integration is typically to increase sales, eliminate costs, and improve profits by improving business operations.

Is vertical integration good?

Vertical integration makes sense as a strategy, as it allows a company to reduce costs across various parts of production, ensures tighter quality control, and ensures a better flow and control of information across the supply chain.

What does vertical consolidation do?

Vertical consolidation is when a company buys another company that performs a service or produces a good on a different part of the supply chain, and the supply chain describes the series of steps necessary to produce a good or service.

What is forward vertical integration?

Forward integration is a business strategy that involves a form of downstream vertical integration whereby the company owns and controls business activities that are ahead in the value chain of its industry, this might include among others direct distribution or supply of the company’s products.

What are the benefits of vertical integration?

Advantages of Vertical Integration

• Increased competitiveness.
• Greater process control.
• Increased market share.
• Increased supply chain coordination.
• Decreased cost.

What is vertical supplier?

Vertical manufacturing refers to vertical integration of a value chain that a manufacturer undertakes to gain a strategic advantage. Manufacturers achieve vertical integration when they control or own elements within a value chain beyond the central manufacturing component.

What are the advantages of supply chain integration?

The Advantages of Integration. Some of the primary advantages of supply chain integration are: Inventory Management – Close alignment with input providers means that a company can order materials to be delivered as needed, rather than purchasing large quantities that then need to be managed and stored.

What does supply chain integration mean?

Supply chain integration is a close alignment and coordination within a supply chain. A supply chain refers to everything required to produce a product from raw materials, to manufacturing, shipping and support services. One of the highest levels of integration is known as vertical integration, which is when the supply chain of a company is actually owned by the company.

What do companies use vertical integration?

Examples of Vertically Integrated Companies Vertical Integration. Vertical integration is the control of multiple levels of a product’s supply chain. Zara. Zara, a Spanish clothing and accessory company, has more than 1,000 outlets worldwide. Luxottica. Hilo’s Seafood Restaurant.

What company is an example of vertical integration?

Apple as the Stalwart of Vertical Integration. Apple Inc. is one of the best-known companies for perfecting the art of vertical integration. The company manufactures its custom A-series chips for its iPhones and iPads.