To integrate or not to integrate, that is the question — at least for some of today’s most forward-thinking tech companies. Eager for the next big break to beat competitors, they’re opting to do so by vertically integrating supply chains.
The ethos of vertical integration centers on ownership. A company sets out to take more holistic ownership of their product’s complete existence. This means reshuffling every aspect of the traditional supply chain — from commodity sourcing through product manufacturing and finally distribution and sales — to fall under their expertise umbrella. In other words, a company that vertically integrates no longer wishes to focus on just one of those supply chain domains, leaving the rest to vendors and partners. They’re going to manage two, three or all four.
In an ideal world, this makes the vertically-integrated a business “jack of all trades,” as they create, design, source, build and sell their products at their price points in their flagship stores. What this conversation often leaves out is how vertical integration strategies actually benefit the consumer — those interested in, tied to or directly buying from a fully integrated tech company.
Nowhere is this as pertinent as in industries needing rugged mobile computers. A vertically integrated computer manufacturer, such as Datalux, can craft built-to-spec computers made for their customers’ exacting demands. From public safety computing and healthcare computing to embedded tablets for field work, these dynamic industries require equally dynamic computer products that are as up-to-the-task as they are. Vertically integrated mobile computer manufacturers help them get there.
Why Vertical Integration Strategies Are Making a Comeback in the Tech Industry
Vertical integration is the trendiest business model to hit the tech world in recent years. And like many trends, it’s actually recycled.
Vertical integration’s tech origin story dates back to the early days of two contemporary computer behemoths — Apple and Microsoft. While Microsoft got its start building the now-standard operating system for most computers and then later scaled up, Apple was already incorporating a vertical paradigm, making both the software and hardware specific to its products. Rather than package those items for another company, Apple turned around and sold it themselves.
Vertical integration at Apple has come to be the industry envy. Nowadays, the company runs a top-down, state-of-the-art vertically-integrated business that creates the components that go inside its own branded hardware devices. They then sell those products at their own branded Apple stores. It is also increasingly looking into digital intellectual property and service expansions, as well as one day making its own core processors — all to stamp further ownership along its supply chain.
Today’s vertical supply chain iteration is thanks mainly to tech startups in Silicon Valley, who have repackaged the basic principles of vertical integration into what they dub “full-stack” models. Full-stack vertical integration runs similar to its predecessor, only its core competencies come fine-tuned for a tech organization to better ideate, design and then more directly sell their software and hardware straight to the consumer.
It aims to bypass competitors and supply chain middleman alike, and in the spirit of startups, can carry equal parts risk and reward.
Vertical integration strategies are appealing to the tech industry for many reasons:
- They match the times. The everyday consumer or business is more tech-immersed, tech-literate and tech-dependent than ever. A computer manufacturer with a business model that sells straight to a tech-savvy audience is directly accessible to that audience, plus has a guaranteed sales outlet.
- They disrupt the status quo. Tech solutions using a vertical integration strategy typically aim to “disrupt” a product or service’s status quo, offering people new and innovative solutions.
- They bring cheaper, agiler goods and services to individuals and enterprises. Both businesses and the average consumer benefit from vertically integrated computer companies, who can typically sell their products at a more competitive price without sacrificing quality or capability.
What It Takes to Make Vertical Integration Work
A vertically integrated computer manufacturer like Datalux positions itself to be that way by offering all-in-one stacked systems for niche environments, such as the IPX RX hospital computer. This means Datalux itself sources the computer parts it needs to build a healthcare or medical client’s exact system model, puts those components together with in-house automated machining, installs the system and then offers continual sales and support to the client.
Such comprehensive computing means the client is getting a product and a service keenly tailored to their exact enterprise. Those enterprises can vary, as will the usage environments. Vertical integration understands this, and companies who employ it most successfully are those who’ve built a business ecosystem from the following:
1. Production Capabilities
First and foremost, you need to have the means of production available if you’re going to produce all the components in-house. This means manufacturing infrastructure, machines and trained labor that can build both the larger and smaller pieces of equipment that go into your full-stacked product. Otherwise, your full-stacked computer isn’t genuinely full stacked.
This is perhaps the most significant and prohibitive aspect to scalable verticals. Vertical integration costs are incredibly high for those acquiring production factories, equipment, machinery and labor for the first time. This step is known as the primary and secondary sectors of production and is fundamental to developing a business vertically.
2. Service and Support Capabilities
Similarly, vertical integration in the tech industry must be bolstered by what’s known as tertiary sector functions.
Tertiary sectors are those in that are service-based. They don’t create or produce a tangible product but instead facilitate a relationship, provide expertise or solve pain points through their work.
The most successful vertically integrated computer manufacturers don’t just build great computers. They know how to install, monitor and support those computers for their clients as well, providing ultimate value.
3. Significant Experience
Apple’s vertical integration model is so successful in part because of their experience. They’ve been at it for over 30 years, molding their company from the start to offer premium primary, secondary and tertiary value. Datalux has curated the same full-stack vertical experience as well, serving full-stack computer systems to clients in the public safety, transportation, medical and industrial industries for over two decades. It’s not new or trendy for our company — it’s second nature.
4. Synergy Between Design and Production
Products that are designed, configured and then produced by the same people benefit from greater cohesion and quality control. Led by the same management and accessing the same resources, everyone from engineers to factory welders to customer support specialists grasps the complete workings of a product across their familiar, in-house supply chain.
Some vertically stacked computer manufacturers may even offer configured-to-order capabilities, meaning the client receives a system designed and produced to their exact requirements.
5. Keen Consumer Attention
The needs of the consumer are paramount for full-stack vertical integration. Luckily, those with domains in the sales or tertiary sectors have direct access to their consumer base. They are more engaged with client wants and needs, beliefs and pain points, and can gear products accordingly. Their vertical integration strategy has given them a direct outlet to the consumer — and it’s the consumer that reaps the rewards.
How Vertical Integration Benefits Consumers
Partnering with a vertically-integrated computing company can affect nearly every level of your enterprise. Aside from the assurance that you’re getting a top-down set of services at a competitive price point — not just a routine product to make a quick profit — you stand to experience additional benefits:
1. Agile Design
Agile design is a systematic way of ideating, prototyping, testing and re-testing a product. It is fundamentally consumer-focused — or should be — taking into consideration the evolving needs and tastes of a target user and how a product can grow to solve them.
Agile design complements the philosophy of vertical integration. Both push companies to stay innovative, and both put the onus of innovation on emergent ideas and solutions, not static products. In the technology sector especially, it can seem like a constant race to come out with the flashiest new product. Agile design ensures the consumer is not just getting something sleek and surface level, but rather something that will grow with them across lifecycles.
2. Small-Batch Processing Capabilities
Rather than running around-the-clock assembly lines, small-batch processing allows for tailored groups of goods to be produced in real-time, in-situ conditions. It’s a perk to integrated supply chains serving niche industries where demand may not be evergreen or products involve a little more fabrication rather than rote assembly. It also means newly integrated companies don’t have to shell out as much on production or factory infrastructure since small-batch processing takes less capital.
What’s more, it allows consumers to call the shots more than they can within a traditional production model. There is less waste and fewer generalities involved in small-batch production models, which ultimately benefit their recipients.
3. Build-to-Specification Capabilities
Build-to-specification computing allows vertically integrated manufacturers to fabricate more custom products. It’s also a production methodology that allows wiggle room in the design itself, without the need for every machine, part and detail to be identical and explicitly drawn out to the letter. Because not all computer systems need to be built to exact stipulations, a general specification design does the job at a fraction of the cost.
4. Increased Rates of Innovation
As noted earlier, innovation and vertical integration go hand in hand. They rely on the same principles and are motivated by the same forces — to deliver full-functioning, high-value products and services to a target client across that client’s lifetime. When innovation gets cultivated across every aspect of a company’s supply chain, the everyday consumer will find they have more dynamic product choices at more competitive costs.
5. Reduced Overhead
Industries like healthcare and public services run on tight budgets with high overhead costs. Technological solutions that directly ease resources by saving time, money or labor reduce those overheads, freeing up these institutions to focus on mission-critical items.
For example, the low-power IPIX RX uses less than 30 watts of energy when running a typical Windows operating system. A hospital’s fleet of battery carts outfitted with IPIX RX computers or tablets can save hundreds — if not thousands — over the course of its battery replacement purchases and energy bills.
6. Improved Project Delivery at a Lower Cost
At the end of the day, customers working with vertically integrated operations have more freedom and flexibility to get what they need, when they need it. Because they’re working with a company that owns its supply chain, there are no middleman costs and less chance of price gouging.
Processes Incorporated in Vertically Integrated Computer Technology
Full-stack computer manufacturers have a few processes and technological perks up their sleeves. Together, these help them design and fabricate a more tailored client product and deliver continuous service solutions:
1. Computer-Aided Design (CAD)
Computer-aided design (CAD) systems allow for a manufacturer to review 3D models of a computer or tablet product or some of its components before fabrication. These models can be tweaked and tested in that program, with some CAD systems even offering real-world simulations to test how a design reacts to external conditions. Once a CAD has been finalized, the computer or tablet moves on to assembly.
2. Automated Machining
Automated machining works with CADs to fabricate the physical computer or tablet. Data gets transmitted from the CAD to the actual production machines and equipment, which in turn reads the digital “blueprint” and begins putting together parts and components.
3. Plastic Injection Molding
Plastic injection molding is used for producing parts in large quantities. It is a quick, cost-effective and low-error manufacturing technique where many duplicate pieces can be made in rapid succession.
One of the most significant advantages of partnering with a manufacturer who does plastic-injection molding is the low cost-per-unit price. It’s a competitive tool to create consistent and high-quality parts for your rugged mobile computers or tablets.
4. Electronic Design
Once the core physical product has been designed, the internal parts of the computer systems must follow suit. Not all printed circuit boards, processors and subsequent internal hardware will be identical — indeed, they don’t need to be with small-batch processing and CAD methodology.
With electronic design automation tools, a manufacturer can design and machine the printed circuit boards that make up the core computer processor. For build-to-spec computing products, this is a key advantage that allows you to get the exact processor, chips and hard drive capabilities needed for your industry’s application.
5. PCB Layout
Manufacturers that can build a tech product and integrate its core processor do so using printed circuit board (PCB) layout design. With technology rapidly advancing and PCBs growing smaller and more efficient, they have dramatically reduced the scale and fabrication costs of electronics. A manufacturer that can prototype, review and place a PCB in-house keeps productions costs even lower and allows you, the client, to get a more complete full-stack fabrication service.
6. Cable and Connector Assembly
Once the PCB layout has been finalized, the full-stack mobile computer manufacturer can then install its relevant cables and electrical connectors. For computers and tablets, this typically means installing a tailored computer port — the interface that allows the computer to “plug in” and connect with other devices, hardware or pieces of computer peripherals. Common computer peripherals for healthcare and public safety include familiar equipment like keyboards, monitors, printers and scanners that allow the system to function as we expect it to.
7. Final Assembly
A full-stack computer and tablet manufacturer will be able to offer all the vertically integrated design and machining steps described above. It’s a winning partnership for the client, as they now have a “one-stop shop” for their complete product and support needs. Every aspect of assembling the rugged computer or tablet system is taken care of in-house, without complicated third-party businesses or outsourced contractors. The final product is linearly assembled, priced competitively and styled to your exact needs and specifications.
Partner With DataLux for Your Vertically Integrated Computer Systems
From individual components like rugged keyboards and monitors to complete all-in-one embedded suites, DataLux provides premium computing products for demanding environments.
Contact us to see what our products can do to make your operations more streamlined, secure and space efficient today