Vertical Integration as a Key for Continuous Technological Innovation

Bazsik, István

Keywords: vertical coordination, control intensity, supply chain, pasta production, Gyermelyi Zrt. Q13, O13

food industry is increasingly concerned with continuity of supply, reliable quality, partner reliability and predictable, continuous production. Vertical integration is a specific tool to meet these needs, achieving production security and quality levels in a given supply chain by allowing the integrator to intervene directly in the system with a high control intensity to achieve the expected results. The largest pasta producer in Hungary and Central and Eastern Europe is the group of companies brought together by Gyermelyi Holding Zrt., which has built a supply chain that has implemented a fully closed vertical integration. In the food economy, a power relationship has developed between actors along the supply chains, resulting in a high degree of vulnerability of supplier-producers, which puts a strain on the supply chains. Vertical integration, which is beneficial and accepted by all parties, can provide an adequate response to this problem. The group has always been committed to the spirit of integration, given its cooperative past, and has always sought to ensure security of supply and quality of the raw material needed for production, in order to take advantage of technological and capacity improvements. Today, the group has achieved a completely closed vertical integration, unique in our country, which has incorporated into its integration system a number of elements that have laid the foundations for the success of the justly famous Italian pasta producers. Through vertical integration, Gyermelyi provides and has provided answers to market pressures such as: raw material shortages, logistical disruptions, unpredictable price fluctuations - resulting in a successful and efficient supply chain structure that is sustainable in the long term, both for its suppliers and for itself. The primary objective of this study is to present a comprehensive overview of the Gyermelyi Group's unique vertical integration as a good practice in our region.
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