This document discusses horizontal and vertical integration in Industry 4.0. Horizontal integration refers to the exchange of data across all objects, departments, and companies within a network. Vertical integration ties together all logical layers within an organization from production to other business units. The benefits of integration include improved visibility, flexibility, productivity, and automation. Integration can occur both within a company and across the supply chain. Cloud-based integration using service-oriented platforms allows data to flow freely between all levels and business units.

1. Valerio Alessandroni
EFCC - Estonian Fieldbus Competency Centre
I4MS Ambassador
Industry 4.0 and the integrated environment
24 February 2021

2. The evolution fueled by Industry 4.0 is based on the premise that the assets
in a manufacturing company are smart, networked and integrated.
Industry 4.0 has further amplified the importance of horizontal and vertical
integration.
Integration

3. Delayed orders don’t allow an ideal or demand-
based production
Unforeseeable events can‘t be immediately
considered in the production program
Uncertainty in communication leads to
misunderstandings and inefficient workflows
Adjustments of the production program require
high costs or efforts
Misunderstandings
Delayed orders
Ineffective PP
Low flexibility
Issues in traditional manufacturing companies

4. Horizontal and vertical integration
“Horizontal integration” means that all objects, departments and all
companies within the network exchange data reciprocally
“Vertical integration” ties together all logical layers within the organization
from the production floor up through R&D, quality assurance, product
management, IT, sales and marketing, and so on.
Data can flow freely and transparently up and down these layers so that
decisions can be data-driven.

5. Horizontal and vertical integration

6. Benefits of horizontal integration
Always-connected machines and production units each become an object
with well-defined properties within the production network.
They can constantly communicate their performance status and
autonomously respond to changing production requirements.

7. Horizontal integration: technology

8. Horizontal integration in the supply chain
Horizontal integration involves all parts of the supply chain.
The partners are connected by a network of information sharing such as
machine maintenance, or the supply of raw materials: in real time the
supplier can be notified of the supply need of a raw material; or a machine
supplier can communicate a whole series of information, through the cloud,
which allows the company to better manage the maintenance.
Horizontal integration can also reach the customer.

9. Horizontal integration
This deeper alignment improves visibility, flexibility, and productivity
while also enhancing levels of automation.

10. Vertical integration
Industry 4.0 vertical integration connects all business units and processes
within the organisation.
In other words, converging operational technology (OT) at the production
level with information technology (IT) at the enterprise level.
Data flows between and is made available to all business units, including the
factory floor, marketing, sales, customer service, purchasing, accounting, HR,
quality control, R&D, and more.

11. Vertical integration
A system is defined as vertically integrated if it manages to involve more subjects,
starting from the base (for example the production lines) up to the upper levels of
the management.
In this way the information rapidly crosses all the subjects involved, reducing the
dead times that usually exist between the acquisition of the data and the decision-
making moment.

12. Vertical integration

13. Vertical integration

14. Integration: business and technology standpoints

15. Integration

16. Technological integration

17. Cloud based integration

18. Cloud based integration
Integration based on service oriented cloud platform

19. Horizontally vs vertically integrated company
A horizontally integrated company focuses its activities around its core
competencies and establishes partnerships to build out an end-to-end value
chain.
A vertically integrated company keeps as much of its value chain in-house as
it can—from product development to manufacturing, marketing, sales, and
distribution.

20. Horizontally vs vertically integrated company

21. Conclusion
Horizontal integration is the acquisition of a business operating at the same
level of the value chain in the same industry.
Other goals include increasing in size, creating economies of scale, increasing
market power over distributors and suppliers, increasing product or service
differentiation, expanding the company's market or entering a new market, and
reducing competition.
from Wikipedia

22. Conclusion
Vertical integration is a strategy whereby a company owns or controls its
suppliers, distributors or retail locations to control its value or supply chain.
Vertical integration benefits companies by allowing them to control process,
reduce costs and improve efficiencies.
from Wikipedia

23. Conclusion
While horizontal integration and vertical integration are both ways that
companies grow, there are important differences between the two strategies.
Vertical integration occurs when a business owns all parts of the industrial
process while horizontal integration occurs when a business grows by
purchasing its competitors

24. Thank you!