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Horizontal and Vertical integration meanings for the supply chain derive from companies development strategies definitions. Horizontal integration usually refers to growing in a specific activity along the value chain of the industry (improving margins by increasing volumes on the value added), while vertical integration is more about expanding the company’s activities along the value chain (improving the value chain overall margins and lead times).

When talking about manufacturing systems, smart factories, and industry 4.0, Horizontal and Vertical integration is more about connecting processes, functions, and business levels that are driving the operations:

Horizontal integration in this context is about connecting all the different functions of the business such as production, supply chain, maintenance, quality, engineering, and more, leveraging OT and IT to bring visibility, flexibility, and enable data driven productivity continuous improvement. This does not only apply at the shop floor level to achieve a smart factory vision, it also apply at higher organizational levels for example to achieve integrated business planning capabilities.

Vertical integration in the context is about connecting the different business levels and information systems layers together to enable seamless top down continuity of business decisions and bottom up feedback from the execution. This type of integration is key to bring reactivity, agility, and assertiveness by enabling to support effective PDCA loops across the strategic, tactical, and execution business levels.

Dassault Systèmes DELMIA portfolio is great at supporting these axis of integration, including Planning Optimization solutions, which become key to link the dots across the different business functions for efficient decisions taking, and to interconnect the strategic, tactical, and execution planning processes for efficient operations driving.