In recent years, manufacturers have been outsourcing increasingly larger bits and pieces of their operations. Even historically sacred cows such as engineering, R&D, and product development are now commonly outsourced, as companies search for flexibility and liquidity at a time of unprecedented global competition and high economic uncertainty.

In Germany, for example, vertical integration in the automotive industry has fallen to about 20 percent of value added among original equipment manufacturers (OEMs), and with further digitization and lower transaction costs, the number may drop to between 10 and 15 percent in the not-too-distant future.

OEMs may be happy to push cost and complexity outside of their company walls—and tier 1 suppliers may be just as happy to pick up the pieces and build their own vertically integrated operations in a bid to improve their competitive positioning and gain additional margin—but there is also a downside for OEMs: they are relinquishing control over huge chunks of their manufacturing cost structure.

To keep their competitive edge, OEMs need to get back into the driver's seat and adopt a true end-to-end (E2E) perspective of their value chain—one that goes from their raw material suppliers to their end consumers and, in today's "circular economy," even to their recyclers. It's not so much about collaborating more effectively across internal functional lines or even beyond the company walls, but rather about increasing the level of synchronization, transparency, and trust among all the players in the value chain. What will distinguish the winners from the pack is that the leaders will act as "orchestrators" of their E2E value chain. The following sections give guidance on building the partnerships and capabilities needed to successfully play that role.