Vertical Integration Is Back

About this episode

The episode discusses the shift from globalization and specialization to vertical integration in response to supply chain risks.

For the past several decades, the dominant playbook was globalization and specialization. Companies outsourced components to the lowest-cost producer, often halfway around the world. Supply chains became long, complex, and highly optimized for cost. On paper, it made perfect sense. If a supplier could produce a component cheaper and sell it to multiple competitors in the same industry, everyone benefited from economies of scale. But there was a hidden assumption baked into that model. The assumption was that supply chains would always function smoothly. And we now know that assumption was flawed. Over the past several years, we’ve seen disruptions from pandemics, geopolitical tensions, trade disputes, and transportation bottlenecks. What used to be considered low-probability events are now happening with uncomfortable frequency. Supply chains are no longer just an efficiency mechanism. They’ve become a source of risk. And when risk enters the equation, the optimal strategy changes. We’re now seeing companies rethink their dependence on third-party suppliers for critical components. In many cases, they’re bringing production back in-house. That’s vertical integration. Not across…

People in this episode

Host: Victor Menasce

Topics covered

• vertical integration
• supply chain
• globalization
• industrial real estate
• risk management

Keywords

• vertical integration
• supply chain
• globalization
• industrial real estate
• risk
• production
• economies of scale

Mentioned in this episode

Organizations: The Real Estate Espresso Podcast

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