Date: March 7, 2016
MIT’s Alexis Bateman writes that vertical integration is gaining favor as companies address quality and sustainability, but it also demands a close look at business priorities
Companies have been vertically integrating operations for many years to gain more control over the supply of key materials. Henry Ford’s ownership of rubber plantations and iron ore mines that provided raw materials for automobiles is a classic example.
The strategy waned in popularity for a time as outsourcing gained favor in business circles, but it is regaining attention as regulatory pressures and the greater focus on materials that go into finished goods put corporate reputations at rising risk. Vertical integration gives companies more control over critical elements of their supply chains, but it also places new demands on corporate leaders as they address questions of how far their companies can go in overseeing all stages of production.
Although much of the recent focus on sourcing has been on issues of sustainability, questions over product quality are also a prominent consideration as companies look at vertical integration.