promoting integration by guiding and assisting lower tier suppliers. In an example of multi-tier integration, Wal-Mart thoroughly integrated P&G's Pampers product line into its supply chain. P&G, in turn, worked with 3M to integrate its production of adhesive strips with Pampers manufacturing facilities.

Forces Driving Increased Integration

The following worldwide trends and forces are driving supply chains toward increased integration:

  • Increased cost competitiveness. Having substantially improved the efficiencies of internal operations, OEMs are seeking further cost reductions by improving efficiency and synergy within their supply chains.

  • Shorter product life cycles. The Model-T Ford, for example, was competitive for many years. A personal computer (PC) is state of the art for less than a year, and the trend toward shorter product life cycles continues.

  • Faster product development cycles. Companies must reduce the development cycle times of their products to remain competitive. Early introduction of a new product is often rewarded with a large market share and sufficient unit volumes to drive costs down rapidly.

  • Globalization and customization of product offerings. Customers the world over can increasingly afford and are demanding a greater variety of products that address their specific needs. Mass customization has become the new marketing mantra.

  • Higher overall quality. Increasing customer affluence and tougher competition to supply their needs have led to demands for higher overall quality.

These increased demands on OEMs for improvements in product design, manufacturing, cost, distribution, and support are being imposed, in turn, on their supply chains.

Case Study: Dell Computer and Fujitsu America

Dell Computer Corporation's success in the past few years and its growth relative to the rest of the PC industry made daily headlines throughout the 1990s. Based on the premise that bypassing resellers, building products to order, and reducing inventories would result in a lower cost, more responsive business, Dell has grown into one of the



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