Logistics Wordbook

Vertical Integration

Logistics Glossary

The degree to which a firm has decided to directly produce multiple value-adding stages, from raw material to the sale of the product to the ultimate consumer. The more steps in the sequence, the greater the vertical integration. A manufacturer that decides to begin producing parts, components, and materials that it normally purchases is said to be backward integrated. Likewise, a manufacturer that decides to take over distribution and perhaps sale to the ultimate consumer is said to be forward integrated.

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