Chapter 9 Introduction

Companies rarely, if ever, own the resources, facilities and activities necessary to make a product from start to finish including delivery to customers. The decision on what to make in-house and what to buy and the task of managing the supply chain that results are key strategic issues within a company and ones that fall within the remit of operations. They concern the width of the internal phase of the supply chain (how much of a product is made in-house), the degree and direction of vertical integration alternatives and the links and relationships at either end of the spectrum with suppliers, distributors and customers (the external phase of the supply chain).

Both the make-or-buy decision and the task of managing the supply chain have major ramifications for a business. They impact growth and level of success and are crucial to survival. The corporate stance and response on both these key issues need to be the result of business-based discussions set in appropriate strategic context and involving sufficient recognition of the integrated nature of the resources and capabilities that forge a company’s ability to compete.

What a company decides to make or buy will impact its potential to be successful in its current markets, while restricting or facilitating its ability to change direction in the future. Having made the decision, a company needs to appreciate that the various elements involved will invariably impact many of the order-winners and qualifiers in its own markets. Traditional corporate approaches, however, typically fail to recognize the integrated nature of the whole and the need to proactively manage all elements in line with its own market needs. Developing cooperation and improving coordination are not just good things to do but are essential if a company is to compete successfully now and in the future. In the past, the activities comprising the supply of materials through to the distribution of products to customers, although financially significant, were considered strategically peripheral. Now companies are recognizing that the ownership of activities and capabilities is not what matters but rather the ability to manage these in support of their markets.

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