Vertical challenges

Paul Snell is managing editor at Supply Management
11 August 2014

14 August 2014 | Paul Snell

Paul SnellThe trend in supply chains over the past few years has been a move towards what the Flextronics CPO Tom Linton describes as “virtual vertical integration”.

In essence this is a move away from Henry Ford-style vertical integration, where an organisation does everything itself, to a model where the supply chain operates in a series of tiers.

At the top of these tiers is what Linton calls the “brand level”, companies whose primary focus is on R&D and marketing. Everything else – raw materials, component assembly, production, etc – is handled by the tiers of the supply chain.

There is a certain irony then that luxury groups – whose value is tied up in their brand more than most companies – are rejecting this approach. Instead, prompted by concerns over security of supply in this booming sector and a desire to access the best skills and materials, firms are acquiring their suppliers and becoming increasingly vertically integrated.

These fears are not confined to the luxury sector. We have previously reported that the economic recovery is putting pressure on supplier capacity, and David Noble warned last month that British companies could be “sleepwalking into another supply chain crisis” because as entities they continue to lack visibility.

The luxury market often sets the trends in the fashion industry. Perhaps it is about to become a trailblazer in the supply chain too.

Nowadays when we use the term brand, what we often mean is reputation, and supply chain operations increasingly contribute to how this is perceived. Brand doyenne Rita Clifton explains how they can be built up, destroyed, and what to do when you find yourself in a crisis.

Clifton will be among the headline speakers at the CIPS Annual Conference and Exhibition in London on 2 October. Join us to enhance your own personal brand with the insights on offer. Visit the website to book your place.

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