The terms “horizontal integration” and “vertical integration” are well known from a number of contexts. From the operational perspective, a horizontally integrated company concentrates its strategies around its core competencies and establishes partnerships to build out an end-to-end value chain. A vertically integrated company, on the other hand, keeps as much of its value chain in-house as it can—from product development to manufacturing, marketing, sales, and distribution.
 
In the world of business growth strategy, horizontal integration refers to the acquisition of companies that address the same customer base with different but complementary products or services. In this manner, the acquiring company can raise market share, diversify their product offerings, and etc. A vertical growth strategy, conversely, involves acquiring companies that bring new capabilities to the table so as to minimize manufacturing costs, protect access to important supplies, interact faster to new market opportunities, and more.
 
When it is about production, horizontal integration has come to refer to well-integrated processes at the production-floor level too, while vertical integration means that the production floor is tightly coordinated with higher-level business processes such as for instance procurement and quality control.
 
In this article we discover how Industry 4.0 has further more exaggerate the significance of horizontal and vertical integration, making them the very backbone on which the Smart Factory is built.
 
Horizontal/Vertical Integration As the Backbone of Industry 4.0
 
When it comes to horizontal integration, Industry 4.0 envisions connected networks of cyber-physical and enterprise systems that insert new levels of automation, flexibility, and operating effectiveness into production processes. This horizontal integration takes place at several levels:
•             On the production floor: Always-connected machines and production units each become an object with well-defined properties within the production network. They repeatedly communicate their performance status and, together, respond autonomously to dynamic production requirements. The greatest objective is that smart production floors are able to cost-effectively produce set sizes of one as well as minimize costly downtime through predictive maintenance.
•             Across multiple production facilities: If an enterprise has distributed production facilities, Industry 4.0 boost horizontal integration across plant-level Manufacturing Execution Systems (MES). In this situation, production facility data (inventory levels, unexpected delays, and so on) are shared seamlessly around the entire enterprise and, where possible, production tasks are repositioned automatically among facilities in order to respond fast and efficiently to production variables.
•             Across the entire supply chain: Industry 4.0 proposes data transparency and high levels of automated collaboration all over the upstream supply and logistics chain that provisions the production processes themselves in addition to the downstream chain that brings the finished products to market. Third-party suppliers and service providers must be securely but tightly incorporated horizontally into the enterprise’s production and logistics control systems.
 
Vertical integration in Industry 4.0 aspires to tie together all logical layers inside of the organization from the field layer (i.e., the production floor) up through R&D, quality assurance, product management, IT, sales and marketing, and so forth. Data flows freely and transparently up and down these layers to make sure that both strategic and tactical decisions will be data-driven. The vertically integrated Industry 4.0 enterprise obtains a crucial competitive edge by being able to respond appropriately and with agility to changing market signals and new opportunities.
 
The Challenges of Horizontal/Vertical Integration in Industry 4.0
 
The horizontal and vertical integration aspirations of Industry 4.0 are quite clear and easy to understand. But, as is often the case in life in general, the challenges to obtaining this vision are considerable.
 
Breaking Down Silos
 
Industry 4.0 levels of horizontal and vertical integration need breaking down data and knowledge silos, which is not an easy task. It starts off with the production floor itself, where equipment and production units from a range of vendors provide varying levels of automation are equipped with a lot of sensors and use different communications protocols. Put simply, they often try not to “speak the same language,” and a meta-network needs to be established that resolves these communications disparities.
 
Data Security and Privacy
 
Horizontal integration in Industry 4.0 requires the sharing of data outside the organization with suppliers, subcontractors, partners, and, in many cases, customers also. This level of transparency is quite empowering as for production agility and flexibility, but it raises the challenge of making sure of that the data of all stakeholders are kept secure and made available purely on a need-to-know basis.
 
Scaling IT Systems and Infrastructure  
 
Industry 4.0 drastically increases the volume and velocity of data being collected and analyzed in order to support enhanced levels of horizontal and vertical integration. In many instances, IT systems and infrastructure will be forced to undergo a fundamental change in order to support the enterprise’s journey towards digital transformation. Industry 4.0 implementations are often a compelling catalyst for moving enterprise databases and workloads to the cloud, where they are more easily accessible to a wide range of stakeholders.
 
Strong Orchestration
 
As the organization’s IT systems and production processes become more integrated and more complex, enterprises will likely need to choose strong orchestration platforms that can provide end-to-end visibility and actionable insights across diverse, distributed systems and entities. These platforms typically aggregate structured and unstructured data from diverse existing enterprise systems in order to extract domain-specific actionable insights and should provide end-to-end product-analytics solutions for both manufacturing companies and their suppliers.
 
Industry 4.0 combines cutting-edge data analytics, machine learning, and artificial intelligence technologies with a purpose to streamline and customize manufacturing processes. At its very core is the vision of horizontally integrating production processes themselves so that they can be self-learning, self-healing, and agile. For Industry 4.0 horizontal integration also means developing a seamless, data-centric, collaborative network across the organization’s entire supply chain. Vertical integration does the same thing for the organization’s own business units, ensuring an unprecedented level of alignment between production processes and core business activities such as ICT, sales, marketing, logistics, engineering, and more.
 
The measurable benefits of such integration include lower production costs and the enhanced ability to cost-effectively manufacture small customized batches—all without having detracting from the highest quality standards.
 
This article is originally posted on tronserve.com