being phased out. Quality is even more critical in supply chains using just-in-time manufacturing and low inventory levels because there are fewer buffers to protect against quality failures.

Thus, SMEs should not consider quality as only a requirement for continued supply chain participation, but as a strategic capability. SMEs that adopt quality as a competitive strategy find that they are better able to weather cyclical swings in their business and that their product costs are lower.

Recommendation. In response to the requirements of integrated supply chains for improved quality, small and medium-sized manufacturing enterprises should adopt quality as a competitive strategy and consider implementing techniques, such as six sigma, ISO certification, and statistical process controls, to comply with customer demands, improve overall business performance, and provide a common language for communication on quality issues.

Cost and Value

Costs have always been critical, and in the increasingly global economy it is not unusual for SMEs to find sudden gaps between their prices and the prices of competitors from low-cost areas. The convergence of (1) improvements in high-speed communications, (2) reductions in transportation costs, (3) the widespread adoption of English as the language of business, and (4) universal access to technology and effective management practices has enabled companies in areas with low labor costs to become competitive regardless of their location. Thus, SMEs must substantially reduce costs by using both traditional and innovative approaches, such as integrating their own supply chains.

Many SMEs will have to do more than provide low-cost parts if they want to become partners with demanding customers. They will also have to provide value-added services, such as low-cost storage, rapid response to warranty issues, ready access to spare parts, improved logistics, and increased design capabilities. Because their present customers may be unwilling to pay for added value, SMEs may have to reposition themselves into new industries and find customers that are willing to pay for value-added products and services.

Recommendation. Small and medium-sized manufacturing enterprises should rigorously reduce costs internally and throughout their supply chains. They should also seek ways to increase the value-added to their products and services and find customers that are willing to reward such value.



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