Studying the industrial revolution you will find many of the titans of industry relied only on themselves. Carnegie likely didn’t know the term supply chain management, nor did he need an acronym to help him understand the concept.  Over 100 years ago these industry magnates were breaking ground on value chain engineering because it simply made sense, not because they learned about it at the latest supply chain seminar. The thought wasn’t about what is easier, it was about control. And to control and own your supply chain meant steady growth with less risk.

Which brings us to the modern day when everything you can think of is outsourced and completely dependent on another company in the supply chain. What we learned a century ago was that vertical integration wasn’t a bad thing. For all the time and effort we put into international sourcing teams, supplier development, and supply chain management on top of all the costs associated with every mere hiccup, does it make more sense for you to own your supply chain?

For you Chipotle fans, every time you walk into the restaurant you’re slapped in the face with the sign touting all the feel good mantras of “Never Given Hormones,” “Naturally Raised,” and “Food With Integrity.” They have spent all these years hoarding brand equity based on the simple concept of if you eat here, you are eating healthy food and it’s worth the money.  But now we are at a tipping point. The supply of antibiotic-free beef cannot support their demand. While they are a big enough corporation likely to outbid everyone else to increase their supply, this would also translate to higher food prices, which the market may not support.

So do you raise the prices and hope that people switch to chicken or dig deeper into their wallets? Or just say, ‘hey, we cannot get enough beef on the open market, so we are going to be transparent and say here is our issue and we may have to use some different category of beef.’ We know which one they chose to do….

But what if that never had to happen? What if Chipotle owned their entire supply chain? As part of a strategic plan 5 years ago, could they have started buying farms and using demand planning to forecast their own supply needs? They wouldn’t have to bid on the open market; in fact, they could operate completely in their own bubble. Their upstream farm operations wouldn’t have to make money, they would only have to break even and ensure a consistent and adequate supply of products to support Chipotle’s operations.

Easier said than done! For the smaller companies or regional companies, it may be a tall task. For a nearly $3B company looking to dominate the globe with their made to order, high quality food with integrity, did it make sense to drain your brand’s value because you didn’t own enough of your supply chain?