Supplier Diversification and survival

A Financial Times article (“Suppliers Shift Gears to Survive”, FT, Oct 5,2010) describes small to medium sized firms struggle for survival. But it brings up an interesting issue – can firms that monitor participants in the supply chain (that they are part of) take advantage of opportunities to grow during the downturn. It quotes a manager of Maxi Container – the company expanded into new industries to survive. Another firm mentioned is Keats Manufacturing – that company took over a plant and moved into the defense industry. Yet other companies, such as Industrial Specialties, expanded into global markets in Brazil and India. Can a focus on capabilities, rather than current products, coupled with nimble decision making, increase the odds of survival of small firms ? Should careful monitoring of the entire OEM supply base enable a small firm to seize opportunities by minimizing disruption for the OEM ? What do you think ?

1 Response to Supplier Diversification and survival

Gerlinde Mikolik says:

December 6, 2010 at 5:46 am

I know the general impression is always that an OEM and especially the very big one’s have enormous purchasing power in negotiations with small or middle-sized supplier but I cannot confirm this preconception. Of course the OEM has the financial resources to compare supplier and choose one of them. But, as soon as a contract is signed with a supplier (even a small one) they are both in the same ballpark. More precisely, it is costly for the OEM to replace the supplier and because there are target costs to achieve the OEM relays on only one supplier per product. Thus, if the supplier has a quality problem, the OEM and sometimes the customers have the same problem. Therefore OEM’s monitor their suppliers in order to avoid quality problems. But the question was should small companies focus on other capabilities and my answer is YES. This strategy can be adopted by large companies to.