In an Industry 4.0 context, horizontal and vertical integration offers substantial benefits to pharmaceutical and medical device manufacturers. These benefits include everything from improved agility and flexibility to enhanced productivity, decision-making, and competitiveness.
Horizontal and vertical integration delivers these benefits by achieving unprecedented levels of alignment across entire organisational ecosystems, from the factory floor to enterprise-level systems, across the supply chain, and in all processes, business units, and third-party partners.
Defining Industry 4.0 Horizontal and Vertical Integration
Horizontal integration and vertical integration are terms used in various contexts, including in relation to business growth strategies. Specifically, it refers to acquisition strategies where companies use horizontal integration to acquire companies with similar products and customers or vertical integration to add new capabilities and bring outsourced services in-house.
However, within the field of Industry 4.0 and the pursuit of the Smart Factory goal, horizontal and vertical integration have a different meaning.
The two concepts centre on technologies, processes, and systems that enable the collection, collation, communication, and use of data.
Industry 4.0 Vertical Integration Explained
Industry 4.0 vertical integration involves connecting all business units and processes within your organisation. In other words, converging operational technology (OT) at the production level with information technology (IT) at the enterprise level.
With this integration in place, data flows between and is made available to all business units. This includes the factory floor, marketing, sales, customer service, purchasing, accounting, HR, quality control, R&D, and more.
Vertical integration isn’t just about integrating enterprise-level systems with the factory floor, however, as it also creates opportunities for integration across the entire field layer of your organisation.
A good example of this is in the batch-size-of-one business model where a customer requests a product customisation. Instead of the sales department retrieving information from production on whether the request can be delivered, the information will be readily available in the ERP system.
Another example is the alignment of raw material procurement with market demand to maximise the efficiency of batch production.
Industry 4.0 Horizontal Integration Explained
While vertical integration involves alignment within your organisation, Industry 4.0 horizontal integration involves connecting all parts of your supply chain. This deeper alignment improves visibility, flexibility, and productivity while also enhancing levels of automation.
Horizontal integration applies within your production facility, across multi-site operations, and to third-party partners in your supply chain, both upstream and downstream.
Within your production facility, horizontal integration is about achieving the Smart Factory, where all systems, processes, and machines are connected, enabling constant communication.
Horizontal integration delivers the same level of connectivity across multi-site operations, ensuring maximum visibility, production adaptability, and collaboration.
The real-game changer is achieving similar levels of decentralisation and connectivity across your entire supply chain, from suppliers and manufacturing through to logistics and distribution, all the way to the customer/patient.
Industry 4.0 technologies make the above integration goal possible in all manufacturing industries, but there are additional considerations in regulated sectors like pharmaceuticals and medical devices. This particularly applies to traceability requirements where serialisation and track & trace solutions are essential components.
Continuing the Journey
Following on from the point above, by implementing a serialisation or track & trace solution, something which is necessary for regulatory compliance, you have already started on the road to Industry 4.0 horizontal integration.
You may also have achieved a level of Industry 4.0 vertical integration.
As with all aspects of Industry 4.0 and the implementation of new technologies, processes, and systems in your business, it is a journey. There is a direction of travel, though, particularly for manufacturers in the pharmaceutical and medical device industries. That direction of travel is towards the achievement of Industry 4.0 horizontal and vertical integration.