The estimated 330,000 U.S. small and medium-sized manufacturing enterprises (SMEs) have a substantial economic impact (Carr, 1998). Defined as having fewer than 500 employees, SMEs are important to the nation because they account for 98 percent of all manufacturing plants, employ two-thirds of the nation's 18 million manufacturing workers, generate more than half of the total value-added in the manufacturing sector, and are the source of many innovations in technology (Weber, 1997).

SMEs typically provide capabilities that their larger customers do not have or cannot cost-effectively create internally, such as:

  • greater agility in responding to changes in technologies, markets, and trends

  • greater efficiency due, in part, to less bureaucracy

  • greater initiative and entrepreneurial behavior on the part of employees resulting in higher levels of creativity and energy and a strong desire for success

  • access to specialized proprietary technologies, process capabilities, and expertise

  • Shorter time to market because operations are small and focused

  • lower labor costs and less restrictive labor contracts

  • spreading the costs of specialized capabilities over larger production volumes by serving multiple customers

  • lower cost customized services, including documentation, after-sales support, spare parts, recycling, and disposal

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