Fine's Supply Chain

Before reading Fine’s supply chain article, I believed that supply chains were part of corporate strategy, but I didn’t know how important they were. In the IBM example, the company picked a modular supply chain design, and it totally changed the company. People now cared more about the supplier’s logo than about the brand name of the company that assembled the components and shipped the final product. IBM had lost revenues because of this. This proved that make-vs.-buy decisions should not be made primarily on which supply option is a little bit cheaper or a little bit faster to market. The same goes for the auto industry. Their clockspeed is a lot slower, but sooner or later, people will care more about the electronic system in the car, than the company who puts the steel together.

Also before reading the article, I believed that if a company went to a vertical or horizontal structure, they stayed there. With using an IBM example again, the company was challenged by Apple Computer. IBM quickly moved from a vertical to a horizontal structure. Now the IBM computer wasn’t the most dominant, the IBM compatible computer was. I learned that a company may switch from horizontal to vertical and back to horizontal, and so on. Modular industry and supply chain structures tend to create fierce, commodity like competition within individual niches. This is a reason they could be short-lived.

Forces that typically weaken a vertical structure and move toward a horizontal structure are as follows: relentless entry of niche competitors hoping to pick off discrete industry segments; the challenge of keeping ahead of the competition across the many dimensions of technology and markets required by an integral system; the bureaucratic and organizational rigidities that often settle upon large, established companies. There are also forces that push toward more vertical integration after being horizontal, and they include: technical advances in one subsystem can make that... [continues]

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