Vertical integration is about converging OT (operational technology) and IT (information technology) in your business, in addition to integrating processes and other systems across different departments and business units.
In its most advanced form, it involves all aspects of the business, from factory floor systems and processes to the ERP (enterprise resource planning) platform, CRM (customer relationship management) system, accounting system, and more.
In many manufacturing businesses, the first step involves ensuring full equipment systems integration at the production level before then integrating with other parts of the business.
While vertical integration is typically achieved in stages, in its totality, it is a significant undertaking. It also delivers significant benefits – benefits that will ensure your business remains competitive and profitable into a future where the regulatory landscape continues to evolve, and customer/patient demands and expectations continue to change.
Improving Data Collection & Replacing Data Silos with Integrated Systems
Vertical integration in your business involves collecting more data (from sensors on production equipment, parts, and products, for example), as well as replacing your existing data silos with integrated systems. Below are the main benefits of implementing this strategy.
With vertical integration, you will be able to move towards mass customisation and lot size of one business models and production strategies. This enhanced level of production flexibility will make it possible for your business to exploit new market opportunities, react quickly to trends, and deliver on the expectations of customers/patients.
Vertical integration will improve the resilience of your manufacturing operation. In other words, making it possible for you to adapt to changing circumstances (such as unplanned downtime) more quickly while also minimising the impact of changed circumstances on customers/patients.
Increased Market Agility
Both the above points give senior executives the options they need to react more effectively to market and business conditions. This could be anything from reducing risk to remaining competitive to taking advantage of a new opportunity.
Improved Security and Privacy
One of the technologies that make Industry 4.0 vertical integration possible is cloud computing. With cloud computing, systems run on the cloud and data is stored in the cloud rather than on-site at your facility.
These cloud solutions are typically built on enterprise-standard platforms like Microsoft Azure. As you might expect, enterprise-standard platforms like Azure come with enterprise levels security.
Therefore, you will enhance security and privacy in your business by implementing cloud technologies (alongside also implementing relevant security processes and procedures) as part of a vertical integration strategy.
Improved Management Oversight and Visibility
Vertical integration provides engineers, managers, and executives with access to greater levels of accurate, well-presented, and highly relevant data. Not only that, but the data is available in real-time.
Enhanced Levels of Automation
Vertical integration increases the processes in your operations that you will be able to automate. Machine maintenance, production planning, and raw material ordering are just some examples.
Productivity levels in your business will improve in a number of areas, not least because all departments and systems will work together more effectively towards the same goal. Even ensuring each person on your team has ready access to information improves productivity as time is saved compared to the previous process of requesting information and then waiting on a response.
More Efficient Operation
You will benefit from efficiency savings too, through productivity gains and enhanced automation, as well as by reducing unplanned downtime, improving access to information, faster decision-making, and more.
Enhanced Customer Service
Responding faster to market conditions, trends, and consumer demands improves standards of customer service.
The integration of customer-facing departments with the production line will also improve customer service. An example of this is customer-facing staff being able to provide information, assurances, and updates to customers based on real-time production information.
Reduced Requirement for Physical Equipment
Converging OT and IT in your business, as well as implementing cloud technologies, should result in a reduced need for physical equipment on-site. This delivers a range of additional benefits including:
- Lower costs for IT and OT infrastructure
- Reduced requirement for physical space for IT and OT infrastructure
- Reduced energy consumption which also lowers costs while helping you achieve your environmental and CSR goals
- Improved performance, particularly in relation to systems and processes moved to the cloud
- Reduced maintenance requirement
The above benefits combined will deliver higher levels of profitability for your business in addition to ensuring you achieve your ROI objectives.
Moving Your Business Forward
It is likely that you will already have achieved a level of vertical integration in your business, particularly if you have implemented automation and/or equipment systems integration solutions.
Going further using a staged approach is the way forward with vertical integration, where you measure improvements and realise the benefits at each step.