3 Manufacturing Vertical Integration Advantages: Speed, Control, Transparency

Nov 05, 2020 Chapter 2. Supplier

This article is talking about the benefits of manufacturing vertical integration.

 

Manufacturing Vertical Integration Advantages

 

There are many common problems in the supply chain’s transparency, and the main issue is explained below. The main issue in the supply chain is unauthorized subcontracting. Among other examples, the metal surface treatment done outside factories experiences this issue.

 

Other examples include:

  • Polishing
  • Plating
  • coating
  • Painting
  • e-coating
  • anodizing

 

Whenever these processes fail to be conducted well, they incur product performance issues. These are among the typical steps in enhancing the quality of products. All these processes are performed outside the leading factories.

The best advice to clients is to conduct the best supplier appraisal techniques. Choosing the best supplier with the best in-house processes gives clients many benefits of vertical integration. That way, they will be in control of their supplier choices.

 

Advantages Of Manufacturing Vertical Integration

 

The supply chain is a broad spectrum, and there are some advantages to each process. Benefits of vertical integration are;

 

Transparency

Having an open relationship with suppliers is priceless. Here the supplier will not be worried about customers choosing replacements because the service providence is excellent. The supplier will conduct their services professionally because they want to retain customers.

 

Control

There are some reasons behind this benefit, and they include:

  • When you buy parts or processes from a supply chain vendor, they will probably treat you as a minority. There is no fun in being treated as a minor customer.
  • You can visit an open supplier, i.e., if the supplier isn’t the type of vendor who hides clients’ information.
  • There will be rare instances of a supplier subcontracting behind a client’s back if you pay them regular visits. That way, there will be few surprises for the customer.

 

Speed

There is this video, which puts this benefit nicely.

An old-timer of Toyota gave reasons why there is the internalization of production. The main advantage is speed.

 

Manufacturing Vertical Integration-supplyia

 

Considering this Toyota approach, many processes get internalized due to upgrading low-tech equipment and purchasing them. You may be wondering what exactly this means, and it means that the equipment will be cheap, and it can also be redeployed if need be {depending on flexibility}. Hiring more labor has positive impacts on manufacturing processes because you will cut costs, enhance your company’s’ uptime, and gain production flexibility.

The reason behind this strategy at Toyota is to simplify the flow of materials. This adds up all the lead time in various companies, and this makes all steps longer. The illustration in the image above explains this phenomenon.

 

 

Manufacturing  vertical  integration speed objectives

 

Manufacturing, payment, and design speed are vital; hence this is a primary objective.

 

 

The illustration shows that fast processes allow early and easy detection of defective products before releasing them. When suppliers do this, they cut on costs, which reduces inventory, saving on costs of storing obsolete items.

With a good plan and managing your production processes well, the result will be low costs. If you buy expensive equipment, it can lead to high prices in an instance of low maintenance. 

 

 

Vertical Integration Conclusion

 

Nowadays, almost all production factories do not understand or follow all the supply chain guidelines. Failure to comply with the distribution, production, logistics, etc. leads to long lead time, high MOQ, and delays. This, in turn, causes customer dissatisfaction, and this will result in bad reviews. When customers leave negative reviews for a supplier, there will be fewer sales because they will break customers’ trust.

Other suppliers specialize in a few processes and try to be efficient in these processes as they outsource work. The result here is commonly in issues of product quality, loss of control, etc.

If this is the instance, streamlining manufacturing processes in a factory is possible, and you can enjoy the benefits of vertical integration.

If you need a China sourcing agent, please contact us.

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