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Assistance for Small and Medium-Sized Manufacturing Enterprises

How can SMEs systematically identify specific constraints and performance gaps that inhibit their competitiveness? Where can they turn for assistance? One approach is to develop close relationships with other members of the supply chain in hopes of benefiting from their experience. Each company, however, has its own agenda, and diverting resources to teach other companies is not usually advantageous. Conferences, trade shows, consultants, trade journals, and industry groups can be helpful. Among the best resources are manufacturing extension centers and technical resource providers (MEC/TRPs), which are chartered specifically to provide advice and counsel to SMEs. MEC/TRPs are typically financed by combinations of public and private funds and can be found in virtually every city and region of the United States. Local politicians can usually assist companies in finding these organizations.

MANUFACTURING EXTENSION CENTERS AND TECHNICAL RESOURCE PROVIDERS

Manufacturing Extension Partnership

The Manufacturing Extension Partnership (MEP), a sponsor of this study, is a nationwide network of more than 70 not-for-profit centers, located in all 50 states and Puerto Rico. Linked together through NIST, they provide access to more than 2,000 manufacturing and business specialists who have hands-on experience. Each center has its own identity, with names like the Florida Suncoast Manufacturing Technology



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Surviving Supply Chain Integration: Strategies for Small Manufacturers 12 Assistance for Small and Medium-Sized Manufacturing Enterprises How can SMEs systematically identify specific constraints and performance gaps that inhibit their competitiveness? Where can they turn for assistance? One approach is to develop close relationships with other members of the supply chain in hopes of benefiting from their experience. Each company, however, has its own agenda, and diverting resources to teach other companies is not usually advantageous. Conferences, trade shows, consultants, trade journals, and industry groups can be helpful. Among the best resources are manufacturing extension centers and technical resource providers (MEC/TRPs), which are chartered specifically to provide advice and counsel to SMEs. MEC/TRPs are typically financed by combinations of public and private funds and can be found in virtually every city and region of the United States. Local politicians can usually assist companies in finding these organizations. MANUFACTURING EXTENSION CENTERS AND TECHNICAL RESOURCE PROVIDERS Manufacturing Extension Partnership The Manufacturing Extension Partnership (MEP), a sponsor of this study, is a nationwide network of more than 70 not-for-profit centers, located in all 50 states and Puerto Rico. Linked together through NIST, they provide access to more than 2,000 manufacturing and business specialists who have hands-on experience. Each center has its own identity, with names like the Florida Suncoast Manufacturing Technology

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Surviving Supply Chain Integration: Strategies for Small Manufacturers Center, the Northeast Pennsylvania Industrial Resource Center, and the Great Lakes Manufacturing Technology Center.1 Each center has the ability to assess a wide variety of problems, provide technical and business solutions, help SMEs create successful partnerships, and provide seminars and training programs. Combining local expertise with national resources, they have assisted more than 62,000 SMEs with problems, including the following: locating resources or technologies determining causes of product defects modifying plant layouts establishing employee training programs increasing sales and improving market share reducing costs implementing new technologies or processes managing change selecting and implementing business and quality management systems adopting information technology to reduce time to market identifying and exploiting manufacturing niches conducting energy audits and reducing energy costs The MEP network has positioned an organization called Supply America Corporation to act as a single contact point for the MEP in supply chain integration. Supply America focuses MEP resources on delivering value-added supply chain products and services to OEMs and their suppliers to improve overall supply chain performance. Robert C. Byrd Institute The Robert C. Byrd Institute (RCBI), another sponsor of this study, is a national technical service provider. The institute has four sites in West Virginia and serves portions of Pennsylvania, Maryland, Ohio, Kentucky, and Virginia. Sponsored by the Defense Advanced Research Projects Agency, RCBI was established to develop a quality, just-in-time manufacturing supplier base for the U.S. Department of Defense and its prime contractors through ''teaching factories," computer integration, and workforce development. RCBI addresses challenges faced by SMEs such as: 1   Locations can be obtained by calling 1-800-637-4634 or by visiting the MEP Web site at http://www.mepcenters.nist.gov.

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Surviving Supply Chain Integration: Strategies for Small Manufacturers keeping abreast of changing technologies, production techniques, and business management practices difficulty obtaining high-quality, unbiased information isolation from other manufacturers, including limited interaction and networking disproportionate burdens created by the regulatory environment difficulty obtaining operating capital and investment funds lack of trained workers, such as certified machinists implementing quality certification programs and new technologies RCBI's goal is to help SMEs (1) to increase productivity through new technologies, (2) to improve competitiveness through workforce development, and (3) to maximize return on investment by integrating technologies. RCBI has developed innovative ways to improve the competitiveness of SMEs at reasonable cost. For instance, they assist SMEs in achieving quality certification for specific task areas designated by an OEM. Success at the task area level often increases an SME's willingness to commit resources for an entire ISO 9000 certification. RCBI's operating units work directly with SMEs to help them identify and fill gaps in their capabilities. The Technical Training/Workforce Development Unit, for example, provides a variety of educational initiatives, including customized training, seminars, workshops, and technical assistance in the following areas: quality programs, including ISO 9000, QS 9000, AS 9000, quality system documentation, and SPC management programs, including leadership development, team building, and task analysis job training manuals design and manufacturing programs including CAD/CAM training, CNC instruction, programmable logic controller training, welding certification, and safety programs nationally certified machinist training The Technical Services Group offers SMEs an opportunity to learn about flexible manufacturing systems, including operator training, while actually producing a product. This "teaching factory of the future" allows SMEs to take advantage of new technologies, increase sales, and improve market share. The Systems Integration Group is a consulting and project management/implementation resource for computers, networking, and telecommunications projects. The 21st Century Manufacturing Network brings the areas of electronic commerce, electronic data interchange, technical education, and computer and network systems

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Surviving Supply Chain Integration: Strategies for Small Manufacturers integration together to provide manufacturers with a central, "virtual" location for business assistance resources. This network of more than 150 regional manufacturers is helping SMEs to create an infrastructure for conducting business on line. Northeast Tier Ben Franklin Technology Center The Northeast Tier Ben Franklin Technology Center, located in northeastern Pennsylvania, is an example of a small regional center. One of four regional centers operating under the Commonwealth of Pennsylvania's Ben Franklin Partnership, its mission is to lead northeastern Pennsylvania to a better economic future by assisting clients in creating innovative solutions that integrate people, technology, and systems for novel competitive advantage. Funding comes primarily from the state and from public and private matching funds. Working closely with Lehigh University, the center's goal is to help companies add value to the products and services produced in the region so that they can compete more effectively with producers from low-wage countries. Virginia's Manufacturing Innovation Center Virginia's Manufacturing Innovation Center, sponsored by James Madison University and the Center for Innovative Technology, is an example of a state organization focused on helping SMEs. Its mission is to enhance the competitiveness of Virginia's SMEs through the development of a well trained workforce and by providing access to advanced computing technology and modern management practices. The center will house laboratory and training facilities (www.isat.jmu.edu/vmic) including: the Integrated Learning Factory, a modern production facility to develop and demonstrate computer-based automation and integration technologies the Biomanufacturing Training Facility to develop skills required for the design and management of biopharmaceutical manufacturing facilities the Microfabrication Laboratory, a clean-room facility used to demonstrate the fabrication of integrated microelectronic devices, sensors, and microelectromechanical systems the Manufacturing Management Laboratory, which provides hands-on learning experience in the dynamic and integrative nature of managing production operations

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Surviving Supply Chain Integration: Strategies for Small Manufacturers Strengthening Manufacturing Extension Centers and Technical Resource Providers The committee found that not all MEC/TRPs are fully capable of helping SMEs compete successfully in a rapidly changing integrated supply chain environment, and not all of them are consistently proficient in providing guidance to SMEs seeking to integrate their own supply chains. Specifically, MEC/TRPs must develop a standard set of supply chain best practices for SMEs and implement appropriate support programs at all of their centers. Uniform, high-quality programs are essential because supply chain integration typically involves multiple companies in scattered locations. Therefore, inconsistent local programs and levels of support can make integration efforts difficult. Sufficient funding is essential for MEC/TRPs to carry out this important new mission without detracting from their other operations in support of SMEs. SMEs generally cannot afford the same high-priced guidance provided by consultants to OEMs. As the survival of SMEs is being increasingly imperiled by converging trends in supply chain integration, technology, and logistics, which are resulting in dramatic increases in low cost, global competition and substantial demands for investment, SMEs have unprecedented needs for state-of-the-art guidance at an affordable cost. Thus, MEC/TRPs should be provided with sufficient public and private funding so that they can focus their efforts on providing critically needed services rather than on fund-raising. SMEs, in turn, should rely more heavily on MEC/TRPs to guide them through their increasingly complex business environments. SMALL BUSINESS SET-ASIDES Considering the imposing requirements of some integrated supply chains, it might seem impossible for SMEs to participate, even in the lower tiers. However, Public Law 100–656 requires that OEMs receiving government contracts in excess of $500,000 give preference to, or put a good faith effort toward, setting aside as much as 20 percent of their subcontracts (or the priced bill of materials) for small, disadvantaged, and minority-owned businesses. Of this 20 percent, 5 percent is allocated for small disadvantaged businesses and 5 percent for businesses owned by women. Numerous OEMs, despite extensive efforts, never fully meet these quotas, often because of a lack of qualified candidates. Many OEMs have taken steps to assist SMEs by making provisions for their participation on procurement review boards, sponsoring small business supplier conferences, and establishing mentor protégé programs to assist SMEs in process development and the development of program plans and budgets.

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Surviving Supply Chain Integration: Strategies for Small Manufacturers McDonnell Douglas (now part of The Boeing Company), for example, offers the following courses at no fee to its suppliers: Statistical Process Control Quality Function Deployment/The Taguchi Approach Design for Manufacturability Design for Assembly Benchmarking Preferred Supplier Certification Effective Presentation Seminar Developing Team Performance Design, Manufacturing, and Producibility Simulation Even though small business set-asides provide opportunities for participation, they do not ensure success for SMEs. Success still requires good performance. Recommendation. Small and medium-sized manufacturing enterprises (SMEs) should avail themselves of the opportunities provided by government small/disadvantaged business programs to accrue financial resources, develop skills and capabilities, acquire compatible systems, and build trusting relationships so that when they are no longer eligible for special consideration, they can stand on their own as fully competitive and integrated members of supply chains. OTHER RESOURCES Other resources that can assist SMEs in filling educational gaps include academic journals, such as the Journal of Business Logistics, International Journal of Logistics Management, International Journal of Physical Distribution and Logistics Management, Transportation Journal, and Supply Chain Management Journal, and supply chain periodicals, such as Supply Chain Management Review, Inbound Logistics, Inventory Reduction Report, and Global Sites Logistics. A variety of educational programs are also available. The Center for Advanced Purchasing Studies and the National Association of Purchasing Management offer a variety of seminars that can be useful for SMEs. Colleges and universities offer seminars, courses, and programs addressing issues associated with supply chain participation, integration, and optimization. SMEs must be selective, however, because some of them are expensive, and some are geared for sophisticated OEMs with massive computer and analytical capabilities.

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Surviving Supply Chain Integration: Strategies for Small Manufacturers ASSESSMENTS OF COMPETITIVENESS A variety of tools can be used by MEC/TRPs to assist SMEs in assessing their competitiveness and identifying gaps in their capabilities. Business opportunities within a supply chain can be evaluated by using the same analytical tools used to evaluate other business opportunities. However, these opportunities should also be analyzed within the context of optimizing the supply chain as a whole. Mapping Few SME managers have identified or understand process requirements and capabilities one supplier tier away, much less two or three. Thus, MEC/TRPs should help SMEs map critical segments of the supply chain in terms of organizations, capabilities, and functions, paying special attention to critical and sole-source capabilities. Ideally, these maps should extend to every key capability and function required to design, manufacture, distribute, sell, and support the product line. Specialized maps of evolving technologies, manufacturing capacities, and other strategic functions can be helpful for planning, integration, and problem identification. Mapping should begin with the identification of key members, functions, and processes of the "neighboring" tiers of the supply chain. Attempts to map, integrate, or manage all processes and functions will generally cause the mapping process to become extremely complex. Thus, at this stage the functions and processes that are most deserving of management attention and corporate resources should be identified and prioritized. SMEs may, for instance, wish to focus only on operational and/or managerial activities that produce specific outputs or add value to the product and disregard support activities. Alternatively, SMEs may wish to focus on non-value-added activities with a goal of ultimately reducing or eliminating them. It is generally worthwhile to include the basic capabilities required of all participants (e.g., quality, cost, service, delivery, basic communications capabilities, fundamental technologies, and financial viability), as well as requirements unique to the specific supply chain (e.g., rapid prototyping, design and development capabilities, enhanced communications capabilities, and unique process requirements). Participants should be evaluated for each required capability and recommendations should be developed to provide specific guidance and priorities to assist participants in improving or acquiring the necessary capabilities. Over time, the knowledge obtained while assisting SMEs with the mapping process could enable MEC/TRPs and their representatives to become increasingly effective in helping a wide range of SMEs.

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Surviving Supply Chain Integration: Strategies for Small Manufacturers MEC/TRPs should collect this knowledge in a readily accessible database, identifying, cataloguing, and updating successful approaches for improving SME performance (see Appendix B for additional information on mapping techniques). Recommendation. Small and medium-sized manufacturing enterprises should use mapping techniques to identify supply chain requirements systematically, compare them with their own capabilities, and rigorously assess their own gaps and constraints. They should use these same techniques as a means of assessing and strengthening their supply chain partners. Recommendation. Manufacturing extension centers and technical resource providers should develop and implement formal, rigorous programs for (1) mapping supply chain requirements against the capabilities of individual small and medium-sized manufacturing enterprises (SMEs) to provide them with effective, specific guidance; (2) gathering data to assess their own training programs; and (3) training SMEs in the use of these techniques. Competitiveness Review NIST and the MEP have developed a holistic assessment tool based on the Malcolm Baldridge National Quality Award and ISO 9000 called the Competitiveness Review. The review, which covers delivery, cost, quality, management, technology, safety, environment, and other business parameters, can provide fundamental guidance to SMEs in assessing their capabilities and identifying opportunities for improvement. The review emphasizes metrics, corrective actions, employee involvement, and goal setting. Several factors should be taken into consideration when using the Competitiveness Review. First, because management is a complicated, multifaceted endeavor, it is difficult to isolate and measure the effects of specific management practices. Second, technology pervades all aspects of business. Therefore, measures of technological success must be based on the results of technology implementation and utilization (e.g., whether a new technology leads to improved business performance). This requires a holistic approach that compares the benefits (e.g., increased sales and profits) with the costs of acquisition and implementation. Third, the subject of innovation is included in the section on technology. However, because innovation may or may not involve technology, a broader view of innovation should be considered. Innovation is essential for sustaining a competitive advantage in every aspect of business. The committee chose

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Surviving Supply Chain Integration: Strategies for Small Manufacturers to include innovation in discussions of management because it is critical that management create a corporate culture broadly conducive to innovation. Fourth, the Competitiveness Review facilitates measuring the current status of an enterprise and identifies targets for improvement for each of the variables. However, it does not identify constraints or help resource-limited SMEs decide which factors are most critical. Constraints The identification of internal and external corporate constraints is an important adjunct to the assessment of capability gaps. Constraints can take the form of limited capital resources, lack of employee know-how, conflicting customer demands, inadequate operating policies, resistance to change, poor leadership capabilities, and so forth. Because constraints can be limitations or barriers to improvement, identifying and dealing with the most significant constraints is as important as filling the highest priority capability and performance gaps. The Goldratt Theory of Constraints attempts to identify the root causes of undesired business effects by evaluating the constraints (both operational and policy) that stifle innovation (Goldratt, 1990). The Goldratt Theory can be used as an adjunct to the Competitiveness Review to help SMEs describe, in operational terms, their goals and how they plan to achieve them. Goldratt used this method, for instance, to analyze a major supply chain for the Cadillac Motor Division of GM, and Cadillac is using the results for competitive advantage. Thus, the challenge for MEC/TRPs is to help each SME understand the implications of supply chain requirements, set appropriate goals or targets, identify the most significant gaps and constraints impeding its business performance, and suggest ways to overcome them. Capability mapping can be helpful for identifying and prioritizing specific capability gaps. Closing the gaps involves (1) eliminating or circumventing constraints, (2) obtaining appropriate capabilities for the evolving business environment, and (3) using those capabilities effectively. Recommendation. Small and medium-sized manufacturing enterprises should seek out local manufacturing extension centers and technical resource providers for assistance in understanding the supply chain integration process, identifying constraints and capability gaps, laying out a road map for improving performance, and implementing the road map.