Vertical integration in supply chains: driving forces and consequences for a manufacturer's downstream integration

摘要

Purpose – Strategic concentration is a key issue for manufacturing companies when designing a supply chain. As a corporate strategy and a supplynchain governance strategy, vertical integration relates to organisational economics and strategic supply chain management. Numerous explanationsnhave been created for vertical integration, and transaction cost economics (TCE) provides a theoretical basis to help understand the process. However,nthe current popularity of vertical integration seems inspired by something more than altering industry structure and minimising cost, which are thentraditionally accepted explanations for vertical integration This paper aims to explore the driving forces for vertical integration, particularly downstreamnintegration of distribution, and the consequences of vertical integration in a manufacturer-distributor-reseller chain.nDesign/methodology/approach – This study adopted an exploratory case study approach to examine a Swedish-based timber manufacturer thatnvertically integrated a distribution centre in the UK, which made it a direct supplier to DIY retailers and builders’ merchants. Data were collectednprimarily through open-ended, face-to-face interviews.nFindings – The study found that the most important factors driving the manufacturer’s vertical integration of distribution were the demands of largenretail chains and the manufacturer’s decisions to focus on developing its positioning strategy in the supply chain. Vertical integration has transformednthe manufacturer into a supplier to large timber products resellers, offering the firm a greater potential to provide integrated solutions and, therefore,nbecome a strategic partner to its customers.nOriginality/value – This empirical study examined a building material distribution channel, a subject that has rarely been studied. Study results addnempirical evidence to explanations and impacts of vertical integration, especially the integration of customer interface.