Strategic Management Quarterly

Balancing the Vertical Integration vs. Out-Sourcing Decision for Quality and Continuity
David M Plum Ph.D; Brian Peters; Devin Shaw

Abstract
Manufacturing executives have the option of either vertical integration, or outside sourcing, or some combination of the two. Pros and Cons exist for all option and is dependent on each enterprise’s philosophy and situation. Some psychological factors may enter the decision, such as, a desire to expand the company via vertical integration; or alternately to go outside to not be “bothered” with the internal management of vertical integration. The vertical integration positives may include: cost savings, quality improvement, lack of available domestic sources, etc. Cons may be in diverting management energy, unknown technology, etc. Outside sourcing pros may be higher quality, new technology, local source availability, etc. Cons may be lack of confidentiality, off shore location, transportation costs, etc. The literature review indicates reasons for the decision and allows the reader to gain from these insights.

Full Text: PDF     DOI: 10.15640/smq.v5n1_2a1