the work as defined in the contract or purchase order). Thus, efforts to optimize overall supply chain performance for the mutual benefit of all participants are generally not allowed unless specifically permitted in the contract.

The committee supplemented its expertise and gained a deeper understanding of issues relating to SMEs and supply chain integration in several ways. First, the committee met with a group of representatives (mostly chief executive officers) of successful SMEs, who presented overviews of their companies and discussed their experiences with supply chain integration. The results of these discussions, combined with the collective experience of the committee members, were distilled into the list of characteristics of successful SMEs presented in Chapter 11.

To test their experience base, the committee developed a brief questionnaire asking SMEs about their technological capabilities and relationships with customers. Field agents of MEP and RCBI administered the survey to 99 SMEs. The results of the questionnaire, although not statistically significant, were useful for obtaining a deeper understanding of the issues confronting SMEs and their customers. The results are discussed in Chapter 6. (A copy of the questionnaire and a summary of the data are included in Appendix A.)

Although each SME has its own definition of success, the committee defined the phrase successful supply chain participation in a manner similar to the traditional definition of business success (i.e., participation in which benefits to the corporation substantially exceed the costs).

Although large suppliers are frequently cited as examples in this report, the lessons and principles generally pertain to SMEs as well. Some of the trends may be slower in coming to SMEs, which are often in the lower tiers of the supply chain. However, SMEs should study these and similar cases carefully so that they can improve their performance both as suppliers and as managers of their own supply chains.

This report is divided into two parts. Part I introduces the concepts of outsourcing and supply chain integration. Part II identifies the requirements imposed on SMEs by integrated supply chains, compares them with the capabilities of SMEs, and recommends courses of action that can enable SMEs to fill their own specific capability gaps.

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