Frost and Sullivan: A New Model for Innovation and Manufacturing A Paradigm Shift
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Production models significantly impact innovation, domestic manufacturing capacity and the resilience of supply chains. Since the Second Industrial Revolution in the late 19th and early 20th centuries, industry has oscillated between centralized and decentralized models of R&D and production, based on various market and regulatory incentives, technology advancements, and other critical drivers that can be broadly categorized into two primary models:
Vertically integrated models: exemplified by Kodak and IBM in the mid-20th century, placed most aspects of product research, development, scale-up and commercial production under one roof and in one location
Horizontally integrated or decentralized models: examples include the U.S. auto and computer hardware industries starting in the latter half of 20th century, relied on a network of third parties, including startups, for product innovation and overseas manufacturers for production
In recent decades, the rise of offshoring hardware innovation and production has led to fragile supply chains, presenting challenges across the sectors but particularly for companies with horizontally integrated operations. While vertically integrated models offer production control and schedule certainty, they often involve high capital investment, a challenge in high interest rate environments like today, and can stifle innovation. To meet future challenges, we must blend the benefits of both approaches into new models… Read the full article on Frost.com