Decades ago, many OEMs were vertically integrated. The strategy offered numerous advantages, including decreased transportation costs, shorter delivery times, fewer supply chain disruptions, faster time to market, and lower costs through economies of scale. On the other hand, the strategy also carries significant disadvantages. A vertically integrated company can get too big to manage effectively. Outsourcing to suppliers and vendors is often more efficient if their expertise is superior. The cost of purchasing a supplier can be significant, and OEMs can incur substantial debt if borrowing is needed for capital expenditures. As a result, most OEMs today obtain parts and subassemblies from a variety of suppliers. Some OEMs outsource manufacturing of the entire product, from purchasing of the parts to packaging and delivery of the finished product. And, some OEMs even outsource the design of their products.

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