The Leading Role Small Manufacturers Have on Supply Chains

For decades, manufacturers were sourcing their materials from company-owned factories or plantations and mines. Today, some manufacturers still partake in this vertical integration while small-to-medium-sized manufacturers are outsourcing much of their supplies to outside firms.

One example of manufacturers using vertical integration is Ford Motor Company’s River Rouge Plant, which included 15.8 million square feet of floor space. Ford owned many of its own resources such as 700,000 acres of forests, iron mines and a rubber plantation.

Today, the automotive industry as well as other manufacturing industries, is realizing the importance of depending on outside firms to design and produce parts. The change not only helped the manufacturing industry but also the overall economy.

Benefits of Shifting from In-House Production to Distributed Production

Today, more than 230,000 small manufacturers form the backbone of America’s supply chains and employ an increasing share of U.S. manufacturing’s overall workforce. Here are the reasons and benefits of shifting to distributed production:

• There is a growing importance for small manufacturers
• An overall growth in employment in manufacturing
• Small manufacturers employ 42 percent of all U.S. manufacturing workers
• Small manufacturers are important to diffusing technological advances
• New jobs are continually created, adding more employees to the workforce
• More time can be spent on research and development for greater innovation
• 13 percent of the workforce in R&D is done by smaller firms compared to 6 percent at large firms
• Small manufacturers are allowed to be more flexible with adopting a new idea
• Strengthening America’s small manufacturers is essential to long-term competitiveness of U.S. manufacturers

MEP’s Supplier Improvement program helps individual small manufacturers identify process improvements and technology upgrades to help them better compete within supply chains. And working across an entire supply chain, MEP’s Supply Chain Optimization Program helps manufacturers build dynamic supply chains by assessing total cost of ownership, building deeper supplier communication, and helping suppliers upgrade their quality.

Connect with our MEP Supply Chain experts for more detail on your specific roadmap.

For more on Supply Chain Innovation, see: Supply Chain Innovation: Strengthening America’s Small Manufacturers.