Live by Deintegration, Die by Deintegration

Ann All

As the world gets flatter, supply chains may have to get more vertical. That's the message of an interesting Slate piece, which itself was based on a Wall Street Journal article.


With the advent of outsourcing, many companies began peeling away layers of business that weren't considered core competencies and passing them off to outside suppliers. Probably the most striking example of this cost-conscious model of deintegration was Dell, and lots of companies followed the PC manufacturer's example.


Now, however, companies like Boeing and Bridgestone are taking ownership stakes in their suppliers, or even buying them outright.


Why? World economic developments -- including an increasing demand for commodities from countries like China and India which, thanks largely to their success in the outsourcing market, now have the money to pay for them -- make it far less likely that companies can count on getting raw materials like copper and nickel at a reasonable price.


A related issue, illustrated well by the recent travails of supply king Dell, is the negative impact that outsourcing can have on what is arguably a company's most valuable asset: its brand.

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