To get ahead in the fast-paced and highly competitive manufacturing industry, OEMs need to consider a more strategic approach to manufacturing their products. By consolidating various stages of production under one roof, streamlining operations and enhancing overall efficiency, vertical integration emerges as a pivotal strategy for businesses looking to increase their competitive advantage.
Here, we explore the benefits and outcomes of a vertical integration strategy and how partnering with a vertically integrated manufacturing partner can drive cost efficiency, scalability, risk mitigation, improved communication, and innovation for OEMs, thus enhancing their competitiveness for a more profitable future.
The most effective vertical integration strategy for OEMs is partnering with a vertically integrated manufacturing partner with well-established vertical business capabilities. The best partners offer the most robust vertical integration strategies, covering comprehensive in-house manufacturing, supply chain management, design and development, and quality control.
Keeping product prices right, scaling operations to flexibly meet demand, reducing risks, and staying in step with innovation are all crucial to OEM competitiveness. Here’s how a vertical integration strategy can enhance these success factors and help OEMs hone their competitive edge.
Thanks to process consolidation, vertically integrated manufacturing partners can reduce the need for multiple external suppliers and significantly lower OEM production costs. This approach can mitigate margin stacking and ease logistical complications associated with outsourcing different parts of the manufacturing process.
With a smoother, more efficient production process, vertical integration can help OEMs cut their material costs, optimize labor usage, decrease shipping expenses and improve their bottom line, thus giving them a competitive advantage in the market.
Vertically integrated providers are uniquely positioned to scale operations quickly and efficiently to meet varying demand levels. This capability is crucial for industries with fluctuating market demands and frequent product changes that require rapid adjustments in production volumes. Audiovisual security and industrial automation, for example, see products advance very quickly, which makes scalability and flexibility vital for production process modifications.
Having all production stages under a single organizational umbrella, as a result of a vertical integration strategy, facilitates seamless scaling for markets like these. Whether it’s ramping up for a high-volume order or accommodating a series of low-volume, high-mix projects, vertical integration provides the scalability and flexibility needed to manage change, fast.
With an optimal vertical integration strategy, manufacturing partners can greatly mitigate risks by enhancing control over the entire production process. With end-to-end production process oversight, manufacturers can better predict and manage potential issues, ensuring continuity and reliability for their OEM partners. This integrated approach allows for tighter control over quality and delivery schedules, reducing the risk of delays and defects.
Expert risk management like this means EMS providers can guarantee a consistent supply chain OEMs can trust, providing them with peace of mind and enabling them to maintain their production schedules without interruption.
Communication and collaboration are essential for ensuring that all stages of production align perfectly. With a vertical integration strategy, manufacturing partners can foster a cohesive flow of information between the different production phases—a stark contrast to disjointed production processes with multiple suppliers dispersed across the supply chain, creating a complex web of communications that is especially challenging for OEMs to manage.
Vertical integration creates communication transparency, making working collaboratively to ensure consistently high product quality straightforward. With real-time updates and immediate responses to any issues that may arise, the likelihood of miscommunication and response delays is reduced, allowing OEMs to maintain production timelines and ensure product quality.
Digital innovation and continuous improvement are critical for sustaining market share and competitiveness in the manufacturing industry. A vertical integration strategy can be advantageous for driving innovation, as it supports the seamless integration of advanced technologies and methodologies into the production process, thanks to its inherent flexibility.
Vertically integrated manufacturing partners with initiatives like digital factories and automation, for example, prioritize leveraging cutting-edge technologies in their services. This leads to the development of better products and more efficient manufacturing methods, which help OEMs remain at the forefront of their respective markets and continue providing superior solutions to their customers.
As the manufacturing landscape grows ever more competitive, vertical integration stands out as a key differentiator, offering substantial benefits in cost efficiency, scalability, risk reduction, communication, and innovation. By adopting a vertical integration strategy and partnering with a vertically integrated manufacturing partner, OEMs can streamline their operations, reduce costs and simplify their supply chains; this, in turn, helps them increase their competitiveness and improve their market share, positioning them for sustainable long-term growth and better ROI.
SVI, a vertically integrated EMS provider, is committed to delivering high-tech solutions that streamline OEMs' entire value chain. Our vertical business know-how, paired with our advanced end-to-end manufacturing capabilities, makes us a partner of choice for businesses looking to drive growth, embrace innovation, and optimize their bottom line.
Learn more about our vertical business services, or contact us for more information on how we can help your business grow.