Resilience Reflection #28: Transforming SMEs for resilience

In this issue of Resilience Reflections , Engin Topan stresses the vital importance of strengthening the resilience of smaller manufacturers which are more vulnerable to fluctuations in labour and disruptions to the supply chain.

In this regular series by the  Resilience@UT  and  4TU Resilience , UT researchers share their personal reflections on current events and trends that impact our daily lives, exploring their implications for resilience. The series is just one of many UT initiatives responding to the urgent need to respond to rapid societal and environmental change. As an academic institution, we have a role to play in strengthening the resilience of the social, technological and environmental systems that support us. The opinions expressed in this article are the author’s own. 

Transforming SMEs for Resilience and Agility in the Post-Pandemic World

As we witnessed during the COVID-19 pandemic and beyond, with the chip crisis, energy crisis, and now the ongoing wars, supply chains need to be more resilient than ever. While these events are happening globally, I had the opportunity to observe their impact on several Small and Medium-sized Enterprises (SMEs) in the Twente [B(1]   region. Despite being regional players, with their workforce from nearby and targeting a regional market, these manufacturers are highly vulnerable to the structural problems of the supply chain their production relies on. They suffer immensely from disruptions in logistics and transportation, because of their lack of information exchange and capabilities for adjusting their production capacity, e.g., machines, materials and human. While already struggling to use their production capacity efficiently because of their small size, they often need to scale it up? to accommodate dynamic changes. In fact, they are often seen as the small, flexible players of the value chain that can absorb the fluctuations in the market.

Pressures from labour markets and climate

While facing these challenges, the manufacturers depend heavily on their most valuable, yet scarce asset: skilled labour. They are content if they can retain their highly skilled workforce and not lose them to larger enterprises. Yet, an ageing workforce and higher salaries offered by larger enterprises exert extra pressure on these firms. Furthermore, as their products are diverse but low in volume, they cannot scale up production or benefit from economies of scale. Furthermore, European regulations in response to climate change are now knocking at their doors, if not already at those of their customers, and therefore, the need to transition to sustainable circular manufacturing is becoming more pressing.

Solutions for SME resilience

In my opinion, if SMEs are not made more resilient and agile, achieving resilience for the entire supply chain is a false hope. To remain competitive in the global market, maintain their strong position, and become more sustainable, manufacturers, especially SMEs, urgently need guidance and support. Transforming SMEs into more resilient and agile players in their value chain requires technologies such as AI and automation, which can be game changers. New business models such as collaborative manufacturing with other companies within the value chain (integration with customers and suppliers), sharing production capacity, and distributed manufacturing (collaboration and capacity sharing with multiple locations and sometimes with even competitors) can provide the needed flexibility but also extra buying power as a coalition of companies. The managers and employees of SMEs are well aware of these concepts and how they can benefit as they face these challenges daily. However, SMEs lack the resources and power to lead and make these changes. Here, governmental organizations, knowledge institutes, and large corporations should lead and collaborate more with SMEs supporting them in making this transition.

Can the University of Twente do something to support this transition? Yes, we can contribute significantly with graduate assignments, internships, pilot projects, and with more applied research projects in collaboration with SMEs. In conclusion, although it may seem a small contribution, I believe we can contribute substantially to the resilience of our global supply chains by offering solutions that strengthen the ability of local, small-scale industry to withstand fluctuations in the supply chain and the labour market.

About the author

Engin Topan is an associate professor of smart manufacturing and supply chain planning, and reliability, maintenance and service logistics in the Department of Industrial Engineering and Business Information Systems.  

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