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Surviving Supply Chain Integration: Strategies for Small Manufacturers
as well as the risks associated with fluctuating currency exchange rates, can have significant effects on competitiveness and profitability.
One of the key differences between traditional supply chains and highly integrated supply chains is the degree of proximity between members and the resulting differences in the efficiency of joint operations. Geographic and cultural proximity traditionally provided business advantages for SMEs, many of whom served only local customers and had to compete only against other local suppliers. Globalization, electronic communications, and modern shipping capabilities now enable suppliers from all over the world to compete for local business. Large suppliers can typically afford proximity capabilities that SMEs cannot, including plant sites near their customers and skills in dealing with different cultures. To remain competitive, SMEs may have to improve their organizational, cultural, and geographic proximity to serve an increasingly widespread customer base.
Organizational proximity can take several forms, including membership in joint project teams or the placement of employees in one another's facilities. Cultural proximity, which typically evolves over time, can be achieved through the adoption of common business practices, jargon, ethical standards, and language. Cultural proximity is especially important for doing business with customers from different countries and cultures. The dividends of cultural proximity can include repeat business, loyalty, and assistance in problem solving during times of crisis.
Geographic proximity may involve locating supplier facilities adjacent to OEM operations. For example, long-term relations between beverage producers and container manufacturers led container suppliers to locate their fabrication plants adjacent to breweries. Cans are drawn, finished, and moved on conveyors through a common wall into the brewery where they are filled, sealed, packed, and shipped, all without human contact.
Proximity in an international supply chain can require investments in metric dimensioning, compliance with international standards, and participation in international trade fairs, such as the one held annually in Hanover, Germany. Partnerships with foreign companies can be used by SMEs to obtain cost-effective access to foreign markets and sources of supply. Effective international participation requires knowledge of the ways of doing business in other countries and cultures. International consultants can sometimes fill these gaps, but management must be appropriately trained, especially for face-to-face communications and negotiations. Training programs, such as the Massachusetts Institute of