Shared information between supply chain partners can only be fully leveraged through process integration, the collaborative working between buyers and suppliers. (DTI, 1998)
Some companies will re-integrate vertically in order to achieve maximum cost-savings. The communications technologies that enable close collaboration between organisations widely separated geographically will also reduce the costs of managing and co-ordinating the different divisions of a single enterprise, even transnationally or globally. Companies will balance the flexibility of alliances with the possible cost reductions that complete ownership of the value chains could bring.
The business-to-business electronic procurement market in the UK alone will be worth £11 billion within two years. (Bonfield, 1999)
Traditional arguments about the economies of owning most links in a value chain will still apply. Management overheads are reduced and interruptions in the supply of critical goods or services should be minimised. Inefficiencies can be cut and strong brands developed. However, vertical integration will not build the same barriers to market entry as it once did. Companies that are vertically integrated will in future be potentially vulnerable to virtual organisations formed by alliances of companies, all of whom provide core competencies that are the best and have the lowest costs in their fields.
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