In this Supply Chain Byte, Lisa Anderson, President of LMA Consulting Group, explores the focus on vertical integration in today’s volatile environment. From rising geopolitical tensions to escalating customer expectations, companies are reassessing what they control and what they should. Discover how vertical integration can help manufacturers strengthen resilience, improve visibility and gain a competitive edge.

Companies have figured out that they must control their end-to-end supply chain if they want to ensure they can serve customers successfully and profitably. All they have to do is consider the exploding pagers in Lebanon or think about the fact that China cut the world off from rare earth minerals required for everything from medical devices to infrastructure and technology, and they will develop strategies to secure the end-to-end supply chain. To succeed in artificial intelligence, vertical integration and/or strong partnerships will be essential. Thus, vertical integration is gaining in popularity.

For example, at the TMC Conference, Cummins showcased a fully integrated powertrain package. This brought together a Cummins X15 engine, Eaton Cummins Endurant 18-speed automated transmission, and Meritor axles, brakes, and drivelines. The benefits of vertical integration allow it to be engineered as a cohesive system, finely tuned for performance, uptime, fuel efficiency, and total cost of ownership. On the other end of the spectrum, Walmart has also vertically integrated. They invested $257 million into a new Kansas facility, and they opened their first state-of-the-art owned and operated case-ready beef facility. It processes, packs and ships 215,000 pounds of beef daily, thereby replacing third-party processors and streamlining the supply chain. 

What should companies do? Start thinking more deeply about your supply chain partners. Since you are only as strong as your weakest link, you must select carefully and invest time and resources into your partners. In addition, you should be looking for ways to better control your supply chain including vertical integration. Expand capacity and follow great companies like Walmart and vertically integrate.

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