Integration example
An example of how a firm has lowered its costs and increased efficiency through integration is Yue Yuen Industrial (Holdings) Limited. This firm primarily produces casual and athletic shoes, but also has interests in a wide range of other business units. The firm has created an integrated value chain that includes suppliers of raw materials and parts, factories, distribution facilities, and retail outlets. By integrating these functions into a horizontal structure the firm gains more control over their products value chain. They more tightly control access to the raw materials and may make it more difficult for competitors to access these materials. In some cases if they have excess capacity they may even sell raw materials to other competitors, thus gaining revenue for items that would otherwise have to be stored (Du, 2007).
Integrating their value chain has also enabled Yue Yuen to make their operations more stable and consistent. Since all of these functions can communicate more readily with each other, inventory and orders can be more efficiently managed. This avoids the costs of overruns and delays from lack of raw materials when they are needed in the production cycle.
Integrating their value chain has also enabled Yue Yuen to make their operations more stable and consistent. Since all of these functions can communicate more readily with each other, inventory and orders can be more efficiently managed. This avoids the costs of overruns and delays from lack of raw materials when they are needed in the production cycle.