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.
Level of Embeddedness of Production and Distribution
There are different levels of embeddedbess of production and distribution systems, ranging from pure standardization where the market is serviced based on assumptions about what the demand may be, to pure customization where the whole commodity chain is responsive to various demand mechanisms. 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 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 thus value chains must adapt very quickly to market fluctuations in terms of preferences and seasonality. They are thus either manufacturing to order or designing 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.