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Surviving Supply Chain Integration: Strategies for Small Manufacturers
immigrants from economically depressed parts of the world can be hired at competitive rates. International centers, such as Washington, D.C., New York City, and San Francisco, are especially attractive to skilled immigrants, and it may be worthwhile to locate an operation there to access their skills.
Acquiring a small start-up company with a key proprietary technology may be less expensive than risking time and money to develop a competing technology.
Courses, seminars, conferences, and technical publications can alert and educate employees to state-of-the-art technologies and opportunities for innovation.
SMEs in possession of key proprietary technologies have potentially valuable bargaining chips if these technologies are needed by OEMs. The benefits of such a business relationship might include technology cross-licensing, engineering assistance, subsidized manufacturing facilities, and low-cost installation of compatible MRP and electronic design systems.
Successful participation in many integrated supply chains is becoming increasingly difficult for SMEs unless they have extensive financial resources. Keeping up with new technologies, the increasing demands of supply chain integration, the increasing risks of product liability, and the reserves necessary to respond to rapid changes in the business environment all require strong financial reserves. Substantial investments in capital equipment and training may be required to remain competitive.
OEMs and higher tier suppliers are increasingly demanding that SMEs make specific investments, many of which are not one-time investments. Systems can become technologically obsolete within a few years, and customers may insist on upgrades even sooner. Although 15-year-old production equipment is common, seven-year-old computers are obsolete. SMEs must find ways to meet these demands. Moreover, as OEMs consider establishing long-term relationships with their suppliers, they are evaluating their financial underpinnings and track records more closely. Thus, SMEs must demonstrate a track record of financial stability and implement financial systems to control costs and inventories.
Although financial requirements were not high on the list of SME concerns in the survey conducted for this study, preventing and filling financial gaps is a central issue. To reduce the need for outside funding, SMEs must focus their activities carefully, maximize their cash flow, invest their resources wisely, and take advantage of the techniques of