supply chain integration to reduce the amount of capital tied up in excess inventories and excess manufacturing capacities.

Funding Sources

SMEs must have financial resources in place in advance of need. Establishing sound investor and banking relationships in advance is essential to long-term financial stability, and like all partnerships, these relationships require ongoing attention. Venture capitalists are a potential source of funds, although they are unlikely to fund an SME unless it exhibits an unusual potential for rapid, highly profitable growth.

Large OEMs and supply chain partners sometimes provide resources and "co-investments" for key SME participants, thereby enabling the SME to become a better supplier, strengthening the partnership, and ultimately benefiting the OEM. This strategy has been pursued successfully by Japanese OEMs, such as Canon and Toshiba. OEM investments can take the form of advance payments for products, equity investments, loans, subsidized product and process development, technology transfer, compatible electronic design and MRP systems, training, and access to experienced people. In the past, Ford, for example, often bought conventional machinery for supply chain members if they needed it to produce for Ford. However, as of early 1999, Ford purchases machinery for suppliers only if the machinery is unique for Ford requirements.

Few SMEs have used supply chain management techniques to integrate their own supply chains. These techniques can reduce the need for investing in redundant inventories and excess manufacturing capacities, thereby freeing cash for other investments.

Recommendation. As supply chain integration requirements and the need for new technologies increase the financial requirements imposed on small and medium-sized manufacturing enterprises, they should integrate their own supply chains to reduce redundant inventories and excess manufacturing capacities, thereby freeing cash for other investments.



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