Partnering for Growth: Tap into the Power of Your Supply Chain

Small and mid-sized manufacturers (SMEs) face tremendous disadvantages vs. larger competitors — from financing to production efficiencies to distribution channels.

But SMEs also have a secret weapon: their supply chains.

Suppliers and customers offer a vast array of capabilities (intellectual property, talent, strategies, ideas) that can be leveraged into profits for your company — and theirs. For example, a customer in need of new material will often finance a small manufacturer’s R&D, especially if they can share the rewards with limited risk.

If you’re a small customer in need of new components or materials, it can work the other way; a larger supplier might finance the required R&D and tooling, in exchange for a long-term contract. These partners — or others — might also offer as-needed production capacity, for seasonal demand spikes or unexpected orders.

Unfortunately, for most manufacturers, “partnership” is an unfamiliar term.

Only 25% of manufacturers report that their relationships with suppliers are “partnerships” in which they share resources, intellectual property, etc. Among smaller manufacturers — less than $25 million in revenues — more than half have a “buy and sell” relationship with suppliers. Relationships with customers are just as bad (or worse) (see Infographic).[1]

These low-value relationships lead to missed opportunities and a litany of wastes. In just one example, the vast majority of manufacturers spend 5% or more of staff time and resources in expediting, fire-fighting, and resolving conflicts with customers and suppliers — instead of strategic procurement and supply-chain partnering.[2]

It doesn’t have to be this way. Find suppliers and customers you trust, and start small — collaborating on a joint process improvement project, or a limited R&D effort. Establish clear goals with win-win outcomes for both parties. You’ll be surprised at how quickly you and your new partners make progress — and at how many new opportunities you share.

[1] MPI Manufacturing Study, The MPI Group, 2015.

[2] Next Generation Manufacturing Study, The MPI Group, 2014.

© 2017 The MPI Group

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