Question 15

Backward vertical integration

The manufacturer is engaging in backward vertical integration by producing glass in-house instead of relying on external suppliers. This strategy allows the company to control the supply chain more effectively and reduce costs associated with purchasing materials.

A) Backward vertical integration

This option is correct because backward vertical integration refers to a company taking control of its supply chain by producing its own inputs or raw materials. In this case, the window manufacturer is moving upstream in the supply chain by making the glass it previously purchased, thus reducing dependency on suppliers.

B) Vendor-managed inventory

Vendor-managed inventory (VMI) is a strategy where the supplier manages the inventory levels of their products at the retailer's location. This option is incorrect because it does not involve the manufacturer producing its own materials but rather focuses on inventory management practices between suppliers and retailers.

C) Forward vertical integration

Forward vertical integration occurs when a company expands its operations by taking control of distribution or retail processes. This option is incorrect because the manufacturer is not moving downstream in the supply chain; instead, it is moving upstream by producing its own glass.

D) Agile supply chain

An agile supply chain is characterized by its ability to respond quickly to market changes and customer demands. This option is incorrect as it does not specifically relate to the manufacturer taking on production responsibilities; rather, it describes a flexible and responsive supply chain strategy that can adapt to fluctuations.

Conclusion

The correct answer is backward vertical integration, as it accurately describes the company's move to produce its own glass, thereby gaining more control over its supply chain. All other options either pertain to different strategic approaches or do not align with the action of manufacturing inputs internally.