• What forms of communication does the customer require? Because many large OEMs are requiring more data and compatible electronic connectivity with suppliers, SMEs should evaluate the costs of gathering the required data and transmitting it by means of compatible systems. They must determine if these investments are compatible with their long-range plans.

  • What access does the supplier have to the customer's product plans and technology strategies? What are the OEM's expectations with regard to supplier participation in product design and development? To be truly integrated and effective, SMEs must understand the customer's product plans and participate at an appropriate level in product design.

  • To what extent does the customer demand and recognize quality certifications, standards, and processes? Customer requirements should be appropriate for the products being purchased, and the supplier's quality capabilities should be compatible with the customer's needs. Supplier conformance with customer requirements should be recognized and supported by customer actions, such as fewer site audits.

  • Can the customer be profitably served? SMEs should assess requirements for additional investment and the extent to which the customer's needs will be compatible with the needs of its other customers. Assessments of the profitability of serving each customer require the capability to isolate costs by customer or supply chain. Thus, the committee suggests that SMEs consider implementing ABC (activity-based costing). By adopting net present value and return on investment approaches, an SME can quantify and compare the costs of serving various customers and estimate the revenues and profits that will accrue from the relationships.

Recommendation. Small and medium-sized manufacturing enterprises should develop and implement customer evaluation and selection criteria, including the following:

  • Opportunities for long-term contracts

  • approach to supply chain integration

  • extent of information sharing

  • required forms of communication

  • access to product and technology plans

  • expectations regarding participation in product design

  • recognition of supplier quality certification

  • whether the customer can be served profitably

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