Monday, November 30, 2009

Are supply chains disappearing?

I certainly hope not, what would I blog about?

But today in the Wall Street Journal an article highlights the trend that many companies, including Oracle, Pepsi, General Motors and Boeing, are all buying their suppliers and/or partners or investing in them for one reason or another.

While this doesn't signal the end of the global supply chain it is a shift worth noting. As some readers have commented these shifts are cyclical and based on the market. I would agree. But I would also say, this is not a one size fits all answer and "going vertical" doesn't mean owning the entire supply chain.

Apple does quite well owning both the software and the hardware of its products, but it still requires its chips from Intel. The same for Pepsi, they are attempting to buy two of their major distributors, but I don't think we will see Pepsi buying the glass company that provides its bottles.

So a line has to be drawn, where it is drawn is up to the company and the market they are in. Too much control can be costly.


Ayush said...

I strongly believe that this control over parts of the supply chain is necessary if the core business of a company is manufacturing-based.

I am an ardent follower of your blog and have written a response to this article on my blog.

Response Blog Post

Christian said...

Isn't the need to buy suppliers a recognition of the inability to collaboratively partner with them. I believe companies that manage to partner well with suppliers (in a win-win approach) have no need to buy their suppliers, saving their precious cash to expand their business. Unfortunately, many companies are still driven by procurement departments that are very adversarial oriented.

Christopher Sciacca said...

Ayush: Thanks for reading and for your comments.

Christian: Yes, I think you are right. If they had the right strategy, they would be more then suppliers, but collaborative innovators, really working closely to add value and not a commodity.

Sasha said...

Supply Chain solutions certaintly stay!

And, Supply Chain Platforms still pop up on the market

Kathuman said...

My personal experience in Supply Chains is that as big companies are projecting their business in time they are seeing trends that sometimes their suppliers do not.
I know of a couple of experiences where multinational companies invest in a raw materials manufacturer for instance with the promisse of purchase of a certain amount of product during the next 3 to 5 years, for instance.
So although Supply Chains are changing, they are nowhere near dissapearing. said...

Purchasing suppliers is the ultimate admission of your inability to integrate, synchronize and collaborate with them!

Perceptant is a recognised expert in Supply Chain Management & Electronic Data Interchange (EDI) and has been linking supply chains for over 20 years.

It's far more cost effective, profitable and rapid to tighly intergate your supply chain than buy it!