Supply Chain Is King

Written by: Javier GomezLast edited: September 19, 2024

Control the raw materials, control the game. The more of the supply chain you can own, the more power you wield. It's not just about efficiency—it's about creating an unassailable competitive position.

The Power of Raw Materials

If you have access to the fundamental building blocks of your industry, you hold the keys to everything downstream. Raw materials are the foundation that determines who gets to play and who gets squeezed out.

The YKK Playbook

Consider YKK, the Japanese company that produces over 7 billion zippers annually—nearly half of all the world's zippers. But their dominance isn't just about volume. It's about owning every piece of the puzzle.

YKK doesn't just make zippers. They manufacture the machines that make the zippers. They produce the boxes that ship the zippers. They control the entire supply chain from raw materials to final delivery. This self-reliance means outside variables are minimized, and they consistently deliver on quality and speed.

When the 2011 earthquake hit Japan with a 9.1 magnitude, most businesses were devastated. YKK rolled out their orders on schedule.

Vertical Integration as Competitive Moat

The pattern repeats across industries. Tesla's high degree of vertical integration allows them to manufacture batteries, motors, and software in-house, controlling quality, cost, and innovation in ways traditional automakers can't match.

Amazon pioneered both horizontal and vertical integration at unprecedented scale, creating a dual strategy that no other company has replicated.

The Scale Advantage

As Adam Tooze notes, YKK was "hit over the head by scale." Once they cornered 95% of Japan's domestic zipper market, they sent employees overseas, establishing factories in New Zealand, Costa Rica, Thailand, Malaysia, and the US.

This global expansion wasn't just about market access—it was about avoiding trade barriers while building local relationships. YKK purchases building materials and equipment locally when establishing new factories (except for their specialized zipper machines, which come from Japan).

The Reliability Premium

Fashion brands stick with YKK not just because of their scale, but because of their reliability. A faulty zipper can make an entire garment unwearable. YKK offers every type of zipper designers could need, in over 9,500 colors—including 20 shades of black.

This reliability comes from supply chain mastery. When you control the inputs, you control the outputs.

Beyond Manufacturing

The principle extends beyond physical goods. Software companies are verticalizing, moving toward industry-specific solutions that control more of the value chain.

B2B distribution is seeing vertical integration across healthcare, metals, food, and building materials as companies seek to control more touchpoints with their customers.

The Modern Supply Chain Arsenal

Today's supply chain leaders are deploying sophisticated tools to maintain control. AI-powered probabilistic forecasting is transforming inventory from a static liability into a dynamic asset, turning uncertainty into competitive advantage.

Meanwhile, companies like Larroudé are pioneering direct-to-demand strategies—producing only shoes that are already sold. As founder Marina Larroudé puts it: "The cheapest shoe to make is the shoe that's already sold."

The Strategic Imperative

Supply chain control isn't just about cost savings or efficiency gains. It's about creating strategic advantages that competitors can't easily replicate. As competitive advantage theory suggests, the goal is to be "different" rather than just "better."

  • Quality consistency that builds brand trust
  • Speed advantages in responding to market changes
  • Cost structures that create pricing flexibility
  • Resilience during disruptions
  • Innovation capabilities that compound over time
  • Data advantages that enable better forecasting and decision-making

The Raw Truth

In a world of increasing complexity and interdependence, the companies that thrive are those that achieve self-reliance in their core functions. They don't just participate in supply chains—they architect them.

The more raw materials you control, the more you control your destiny. Supply chain isn't just a business function—it's the foundation of competitive advantage.

In the end, it's simple: own the inputs, own the game.

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