Virtual Integration
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Experts:
Dell Corp.
Cisco Systems, Inc
Timing:
Historically, the trend among companies in the manufacturing sector has been to do everything in-house, to be "vertically integrated". This model is being challenged, driven largely by the need for economies of scale and greater asset utilisation, and the need to be on-time in the market with products. This need has created specialized companies across various horizontal layers. The Internet is helping tie-in these companies into closer companies, to create "virtually integrated" companies.
It is this virtual integration across the supply chain which helps companies like Dell and Cisco outsource much of their manufacturing, and focus primarily on design and marketing. And this business model has spawned a relatively new industry called Electronic Manufacturing Services (EMS). EMS companies offer a vast array of products and services to accelerate time to market and time to volume for a broad range of OEMs. In doing so, EMS companies allow OEMs to reduce total costs, increase cash flow, conserve capital and focus on their own core competencies such as product design and marketing.
Moreover,the Internet has cut geographical barriers to do business, and with supply chain management and optimization software made virtual integration easier.
Thanks to virtual integration, closed business systems are giving way to collaborative relationships. B2B ecommerce is not just about finding the cheapest supplier halfway across the world; it is about using technology to build trust with suppliers, and deepening relationships with these trusted parties.
Web Resources:
http://www.paconsulting.com/news/by_pa/2000/by_pa_20000321.htm
http://portal.cetim.org/file/1/68/KatzySchuh-1999-The_virtual_enterprise.pdf