Source: adapted from W. Delfmann (2007) “The Changing Role of Gateways in the Context of Global Value Chain Dynamics”, Canada’s Gateway and Corridors Initiative Conference, Vancouver, British Columbia.
There are different levels of embeddedness of production and distribution systems, ranging from pure standardization where markets are serviced based on assumptions about what the demand may be, to pure customization where the whole value chain is responsive to various demand mechanisms as they take place. The trend in most sectors has been towards a higher level of embeddedness since this is associated with a higher synchronization level with market demand and lower inventory levels.
- The energy and raw materials sectors tend to have low levels of embeddedness as they have stable outputs and a fairly well-known demand pattern that can be predicted in advance (e.g. oil consumption). These sectors often produce and process without orders or stockpile goods.
- The apparel sector is probably the one closest to pure customization as fashion is constantly changing, and value chains must adapt very quickly to market fluctuations in terms of preferences and seasonality. These value chains are thus arranged along the principles of manufacturing to order or design to order.
- Computer hardware manufacturers with a strong online selling strategy, such as Dell, fall within the customized standardization paradigm as they offer customers the possibility to have specific specifications built from a set of existing parts. The product (computers) is often not assembled until an order has been placed.