Backward Integration Get Assignment and Homework Help For Statistics Course

The document discusses backward integration, which is when a company seeks ownership or control over its suppliers. It provides examples of companies integrating backward, such as Procter & Gamble controlling suppliers to Walmart. Some industries are reducing backward integration in favor of negotiating with multiple outside suppliers. Global competition is also pushing companies to reduce the number of suppliers and demand higher quality.

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Backward Integration Get Assignment and Homework Help For Statistics Course

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Backward Integration Statistics Assignment

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Backward Integration

Both manufacturers and retailers purchase needed materials from suppliers. Backward
integration is a strategy of seeking ‘ownership or increased control of a firm’s suppliers. This
strategy can be especially appropriate when a firm’s current. suppliers are unreliable, too costly,
or cannot meet the firm’s needs. When you buy a box of Pampers diapers at Wal-Mart, a scanner
at the store’s checkout counter instantly zaps an order to Procter & Gamble Company. In contrast,
in most hospitals, reordering supplies is a logistical nightmare. Inefficiency caused by lack of
control of suppliers in the healthcare industry is, however, rapidly changing as many giant
healthcare purchasers, such as the U.S. Defense Department and Columbia/HCA Healthcare
Corporation, move to require electronic bar codes on every supply item purchased. This allows
instant tracking and recording without invoices and paperwork. Of the estimated $83 billion
spent annually on hospital supplies, industry reports indicate that $11 billion can be eliminated
through more effective backward integration.

Some industries in the United States, such as the automotive and aluminum industries, are
reducing their historical pursuit of backward integration. Instead of owning their suppliers,
companies negotiate with several outside suppliers. Ford and DaimlerChrysler buy over half of
their component parts from outside suppliers such as TRW, Eaton, General Electric, and Johnson
Controls. De-integration makes sense in industries that have global sources of supply. Companies
today shop around, play one seller against another, and go with the best deal. Global competition
is also spurring firms to reduce their number of suppliers and to demand higher levels of service
and quality from those they keep. Although traditionally relying on many suppliers to ensure
uninterrupted supplies and low prices, American firms now are following the lead of Japanese
firms, which have far fewer suppliers and closer, long term

relationships with those few. “Keeping track of so many suppliers is onerous,” says Mark
Shimelonis, formerly of Xerox.
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