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Specialization era (phase I): outsourced manufacturing and distribution

During the 1990’s, organizations began to shift their attention to their core competencies and specialization. They did away with vertical integration, sold off non-core operations and outsourced those functions to other companies. This changed the management dynamics considerably by pushing the supply chain beyond the boundaries of the company and allotting management across specialized supply chain partnerships.

This evolution also realigned the fundamental perspectives of each organization. Original equipment manufacturers (OEMs) became important business entity with them becoming brand owners that required visibility deep into their supply base. They had to control the entire supply chain from above, instead of from within. Contract manufacturers had to manage bills of material with different part-numbering schemes from multiple OEMs and support customer requests for work-in-process visibility and vendor-managed inventory (VMI).

The specialized model creates manufacturing and distribution networks composed of several individual supply chain particular to producers, suppliers, and customers that work together to design, manufacture, distribute, market, sell, and service a product. This set of partners may need to be adjusted according to a given market or locations, this leads to an increase of trading partner environments, each with their own distinctive attributes and demands.

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