SMEs shun supply chain integration

28 June 2000
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29 June 2000 | Sam Tulip

Most small businesses in the east of England view their customer relationships as strategically important, but less than half see their supplier relationships in the same way, according to a recent survey.

Supply chain integration barely figures on the agenda of many small to medium-sized enterprises (SMEs) in the manufacturing sector, with only a quarter of those questioned giving significant weight to supply issues.

The survey by the east branch of the Regional Supply Network (RSN-East), set up by the Department of Trade and Industry to improve supply chain infrastructure, also found that SMEs do not believe they can influence the supply chain, thinking that they are too small to matter to original equipment manufacturers (OEMs) and without the spending power to affect suppliers.

Integration is the strongest in sectors that have dominant OEMs and relatively short supply chains, the survey of 240 firms across seven industries revealed. The food and drink and automotive sectors had more integration than those of engineering, electronics, chemicals, print and packaging, and oil and gas.

The survey also found that adversarial relationships are still thriving. Sixty-seven per cent of the respondents had experienced loss-of-business threats from customers, while 58 per cent had made similar threats to suppliers.

Many of the SMEs questioned regarded open-book relationships as a "confidence trick" and were concerned about being dropped by customers at the end of a contract. A lack of trust and computer systems were cited as other factors inhibiting greater supply chain integration.

The results mean SMEs that manage to pull off small efficiency improvements will gain several times over, said John Scudder, an RSN-East supply chain adviser who presented the findings at an Institute of Logistics and Transport conference in Birmingham this month.

"SMEs must remember that supply chains are about the flow of information, as well as material," he told SM. "This is where business-to-business e-commerce can help to transfer information to an SME's advantage."

* For more information about the survey, visit www.rsneast.co.uk.

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