The idea of Vertical Integration is once again gaining steam for manufacturing operations. The pendulum that swung over to outsourcing is swinging back to vertical integration. Here’s a link to a “pre-covid” blog post we put up in September of 2018. VERTICAL INTEGRATION. It’s worth a quick read again in light of this new-found (history repeating itself) understanding of the benefits of vertical integration.
It’s easy to look at a Profit and Loss Statement and determine what your labor and raw material costs are. A simple answer to a CEO looking to cut costs is to say, “if we stop making input material X, and just buy it from some other company, we can dump all of this labor and carrying cost” … simple. The savings can start tomorrow. OK, go for it! But wait a second, does anyone in the board room understand how that operation keys into the overall Jenga game that is your business?
But as the pendulum swings, the realization has come that dropping that labor and equipment also means eliminating the immense knowledge base that took years to build, it means slowing down new product development, it means giving up total quality control, it means dragging out “fail-fix” cycles that drive innovation. And when you are manufacturing products that are often mission critical and safety critical, lost knowledge and loss of quality control is a risky proposition.
Now, of course, no company can do everything and trying to do so creates a lumbering giant of a beast that can be impossible to tame. So, you must be smart and realistic about your options for vertical integration.
Let’s look at one of our product groups. We at W.F. Lake Corp. manufacture our PTFE coated fiberglass tie cords, lacing tapes and draw cord in-house. No, we don’t manufacture fiberglass filaments, that is simply not within our reach. But we pretty much take it from there. Here in our Northern New York factory, we twist fiberglass yarns, we run coating lines to produce PTFE coated fiberglass yarns (individually coating each yarn with PTFE prior to braiding), we wind it onto braider bobbins, we do the braiding to make Teflon* coated tie cord, lacing tape and draw cord and wind it once again onto the final customer specified package. (In some cases, we apply an anti-slip coating over the braided product). And all along the way, we have our operators applying their extensive knowledge to produce these critical products.
By controlling the process from start to finish, we can quickly address any issues that arise, we can trace the yarns back to the raw material, we assure quality outcomes at every step of the process, we can innovate quickly, and we can adjust our scheduling internally to meet customer needs. It’s all good. And it’s all due to smart Vertical Integration…something we’ve been pursuing for over 30 years.