As we could see the other day in class, a supply chain is about the flow; about communication. The better communication between the steps in the supply chain the lower the costs. The problem is that too much communication also increases some risks. Should we let our suppliers know what the customers are demanding? Should we let them know how much the customers are paying for the product?
Communication is an advantage and also a disadvantage, that´s why some companies, like Gildan, have decided to vertical integrate. In a vertical integration a company controls more than one step of the supply chain; sometimes the whole supply chain. So they can communicate with no risk.
Gildan is a manufacturer of T-shirts, fleece, sport shirts, underwear, socks, hosiery and shapewear. They have many other brands under Gildan, so they sell their products through different brand names. They have an exclusive U.S sock licence to distribute them. And also licences to distribute abroad. They sell their products in 2 principal markets; printwear and retail markets. And they distribute their products in the US, Canada, Europe, Asia and Latin America.
They own all the facilities where the products are made and they sell them; distribute them. So they can control almost every stage of the production process. The first step is spinning US cotton into yarn, then textile production, after that sewing and finally distribution. In the article is mentioned how this vertical integration allows them to uncover efficiencies while ensuring safe and health work environments for its employees. They have invested billions of dollars in new technology and innovation and sustainable solutions in their operations. At the moment, the own over 25 manufacturing facilities.
This company is a perfect example of a vertical integration that has been able to decrease costs and increase efficiency by communication. As I have already mentioned, communication is the key to decrease costs in the supply chain. But in order to communicate there has to be some kind of trust; and, if a single company owns the whole supply chain there will be trust.
So, do you think that vertical integration is the only solution to eliminate the communication issue or there is another way to communicate without risks? Could be possible to trust our suppliers, retailers… if they do not work for the same company as us; if they do not have the same goals? How could we improve communication of the company doesn´t have the budget to vertical integrate?