Ben Worthen, Cari Tuna and Justin Scheck of The Wall Street Journal today report on the reintegration of corporate supply chains in a deep cover story on the real-world impact of shifting trends in business strategy.
In another result of the recession, companies such as Oracle, ArcelorMittal, PepsiCo Inc., General Motors Co. and Boeing Co. are buying back units they spun off as separate companies and acquiring former partners (such as Oracle and Sun's merger) to gain more control over their supply chains in a volatile world.
Worthen has been covering San Francisco technology scene for a while and it shows in finding this quote from Oracle's CEO Larry Ellison:
Just two years ago, for example, Mr. Ellison said Oracle would stick to its traditional focus on software. Computer hardware isn't "a business we have any ambitions in," he said then. In a September speech, he called that view "fundamentally wrong." Mr. Ellison declined to comment for this article.
Specialization was a boon to management for a while, helping to force efficiencies on business that couldn't be done inside a wider company - but too much outsourcing led to major problems at big manufacturers.
In the past two years, Boeing bought a factory and a 50% stake in a joint venture that make parts for its troubled 787 Dreamliner jet. The moves partially reversed Boeing's aggressive outsourcing strategy to assemble the Dreamliner from parts made by hundreds of suppliers. Supply and assembly problems have knocked the Dreamliner more than two years behind schedule. Boeing CEO Jim McNerney says the company is still committed to outsourcing.
Likewise, GM in October took a minority stake in Delphi Automotive LLP, its biggest parts supplier, and purchased four factories and Delphi's steering business as the supplier emerged from bankruptcy. GM, which spun off Delphi in 1999, wanted to assure uninterrupted supply, a spokeswoman for the company says.
The writers compare the history and impact of past conglomerates with today's and take the time to explore the market trends that made the strategic shifts necessary.
Communications-wise, for companies making U-turns, this article was a great way to be part of a trend, rather than just saying "we were wrong and now we're going backwards." This story might not have sounded great to the PR departments when the phone range but they ended-up well served by the result.