Glossary of Terms

Vertical Integration 2019-08-06 08:00:00

Vertical Integration

Vertical integration occurs when a firm acquires all facets of a supply chain in the pursuit of cost reduction and efficiency. 

There are two forms of integration: forward and backward integration. A firm in the business of distribution seeks forward integration by reducing transportation costs, etc., while a firm seeking backward integration is typically in manufacturing and reduces its costs in the process of combining inputs to create value in a finished product.