What is the impact of vertical integration on a company’s supply chain?

Vertical integration significantly impacts a company's supply chain by allowing the firm to gain control over multiple stages of production or distribution. By integrating vertically, a company can manage various operations—such as sourcing raw materials, manufacturing products, and distributing them to customers—within its own organization. This control can lead to improved coordination, reduced supply chain costs, enhanced quality management, and increased efficiency, as the company is less reliant on external suppliers and has greater oversight over its processes.

When a company has this level of integration, it can respond more rapidly to changes in demand, adapt to market fluctuations, and maintain a competitive edge. This model can also help in reducing transaction costs associated with dealing with outside vendors and improve supply chain reliability by minimizing dependencies on external parties. The ability to streamline operations often results in better strategic positioning in the market.