Question

Given the complexities involved with supply chains, might it make sense for a business to vertically integrate and be its own supply chain? Justify your position.

What trade-offs would you consider. Keep in mind that some companies aggressively outsource as much as possible while others strive to keep the work in-house.

Answer 1

It depends on the size of the business operations and the experience the company has when deciding whether to own its own supply chain or to outsource it. Big companies have an intricate and large scale supply chain where it makes sense to have its own supply chain. This not helps in saving the costs incurred on outsourcing, but the company gets better control over every aspect of the supply chain. Also, the company needs to have good enough experience in the supply chain management before it can completely own it.

On the contrary, small companies with small scale operations can have top-notch quality supply chain management if they outsource it. As the outsourcing company has skilled workers and experience in dealing with supply chain management, they can provide a better service than the small company with relatively no experience.