Manufacturing vertical integration has become increasingly popular due to its many advantages. This article delves into the benefits of this approach and why it is becoming a preferred choice for many companies.
One of the main issues in the supply chain is unauthorized subcontracting, which often results in quality issues. Processes such as polishing, plating, coating, painting, e-coating, and anodizing are typically conducted outside of leading factories, leading to potential performance issues. However, by conducting the best supplier appraisal techniques and choosing suppliers with in-house processes, clients can reap the benefits of vertical integration and have more control over their supplier choices.
Key Takeaways
- Manufacturing vertical integration offers many advantages to companies.
- Unauthorized subcontracting in the supply chain can lead to quality issues.
- Conducting the best supplier appraisal techniques and choosing suppliers with in-house processes can help companies achieve vertical integration and better control their supply chain.
Advantages of Manufacturing Vertical Integration
Transparency
One of the major advantages of vertical integration in manufacturing is transparency. When a company integrates vertically, it establishes an open relationship with its suppliers. This transparency ensures that the supplier is not worried about losing customers to replacements as the service provided is excellent. In turn, the supplier will conduct their services professionally to retain customers. This open relationship between the manufacturer and supplier can result in better communication, which can lead to improved quality and efficiency in the manufacturing process.
Control
Another significant advantage of vertical integration in manufacturing is control. When a company buys parts or processes from a supply chain vendor, they are often treated as a minority. However, with vertical integration, a company gains more control over the manufacturing process. Companies can visit open suppliers who do not hide client information. This allows them to monitor the manufacturing process and ensure that the supplier is not subcontracting behind the client’s back. Regular visits can also minimize surprises for the customer.
Speed
Speed is another key advantage of vertical integration in manufacturing. By internalizing production, companies can streamline their processes and reduce lead times. This approach has been successfully implemented by Toyota, which has upgraded low-tech equipment and purchased it at a lower cost. By hiring more labor, companies can cut costs, enhance their uptime, and gain production flexibility. Simplifying the flow of materials can help reduce lead times across multiple companies, making all steps shorter.
In conclusion, vertical integration in manufacturing offers significant advantages such as transparency, control, and speed. By establishing an open relationship with suppliers, companies can improve communication, leading to better quality and efficiency in the manufacturing process. By gaining more control over the manufacturing process, companies can ensure that the supplier is not subcontracting behind the client’s back. Finally, by internalizing production, companies can streamline their processes, reduce lead times, and gain production flexibility.
Manufacturing Vertical Integration Speed Objectives
Efficient manufacturing processes, payment, and design speed are crucial objectives for any business. The faster the production processes, the easier it is to detect defective products before they are released. This helps to cut costs, reduce inventory, and save on the costs of storing obsolete items. Proper planning and effective management of production processes can lead to lower costs. However, investing in expensive equipment can lead to high prices if not well-maintained. Therefore, companies should aim for a balance between speed and cost-effectiveness to achieve successful vertical integration in manufacturing.
Vertical Integration Conclusion
In today’s highly competitive market, it is essential for production factories to follow all the supply chain guidelines to avoid long lead times, high MOQ, and delays. Failure to comply with these guidelines can result in customer dissatisfaction and negative reviews, which can ultimately lead to a loss of sales and broken customer trust.
While some suppliers specialize in a few processes and outsource work to be more efficient, this approach can lead to issues with product quality and loss of control. Streamlining manufacturing processes through vertical integration can help overcome these issues and provide numerous benefits.
By vertically integrating, factories can control all aspects of production, from raw materials to finished products. This approach can lead to improved quality control, reduced lead times, and lower costs. Additionally, vertical integration can provide greater flexibility in responding to changing market demands and trends.
Overall, vertical integration can be a valuable strategy for production factories looking to improve their efficiency, quality control, and customer satisfaction.