When Armand Afilalo finished his MBA many years ago, his plan didn't include a career as an entrepreneur.
But that was before Afilalo, from a perch as a vice president of a Big 5 Canadian bank, spotted a trend that changed his life.
"Many multinationals were boosting their competitiveness by integrating themselves into global supply chains, in particular by outsourcing production to small and medium-sized enterprises," Afilalo says.
"So when the opportunity arose to invest in MEP Technologies, one important selling point was how well the company was positioned to profit from this trend."
Afilalo's acquisition of MEP Technologies - a Laval, Quebec, company that he has headed for over two decades - proved to be the right move.
Since he got on board, the high-precision metal product manufacturer and designer - which supplies the semi-conductor, industrial and electronics sectors - has grown to 200 employees from just 13. Most of its work comes from sales to multinationals based in the U.S. and Mexico.
Joining global supply chains
MEP Technologies is far from the only entrepreneur-led Canadian business that's been profiting by selling to multinational corporations.
To help build on this growing trend, the Conference Board of Canada has published, in partnership with the BDC, 2 reports looking at the increasingly close relationship between small and medium-sized businesses and multinational corporations (MNCs).
The first report, entitled Big Gains with Small Partners: What MNCs Look for in Their SME Suppliers, offers recommendations on how companies can establish better connections.
The second report, entitled Small Companies, Big Connections: Benefits and Challenges for SMEs in Working with MNCs , looks at the respective roles of small and large companies in evolving global value chains.
Among the areas covered by the reports are how and why MNCs work with smaller partners; how SMEs can best fit into global supply chains; and the emergence of new models of supplier relationships.
Jérôme Nycz, vice president for strategic planning at BDC, says the studies are timely because "many people still don't realize how important the emergence of global supply chains has been in fuelling the growth of small and medium-sized business."
Tim Krywulak, a senior research associate at the Conference Board, agrees.
"It's a win-win situation for both big and small companies," Krywulak says. "Working with SME suppliers offers big gains for large multinationals in improved productivity, increased innovation and access to new markets."
Specialize, add value and partner
The reports say Canadian SMEs can best tap into global supply chains by supplying multinationals with niche products and services to increase efficiency, productivity and innovative capacity.
Afilalo has long used these approaches almost instinctively.
For example, MEP Technologies cooperates closely with its customers in areas ranging from training programs to data access. The idea is that the supplier and multinational customer work as a unit. "There's no secret," says Afilalo. "Our customers expect us to be the best at what we do. That doesn't mean we need to be the cheapest. However, we do have to add the most value for the dollars that we charge."
Another way that MEP Technologies has stood out is in its focus on quality. "We were the first company in our sector to be ISO certified. Back then, hardly anyone knew what that meant. But for our customers, it was important," says Afilalo. "Still, we haven't rested on our laurels. We are continuously upgrading and streamlining our processes to stay ahead of the game."
That said, Afilalo admits that recent pressures caused by the economic downturn and Canada's strengthening currency have increased competitive pressures. "But a big part of our success relates to the fact that multinational companies boost their efficiency by dealing with us," says Afilalo. "So in the long run, if our customers need to be even more productive, that should be a good thing for us, too."
How SMEs can break into global supply chains
One of the biggest challenges SMEs face in breaking into global supply chains is getting a foot in the door for the first time.
"Our research shows that small companies have a lot of trouble simply getting on the radar of multinational corporations," says Karen Kastner, BDC's director of corporate planning and strategy manager. "In many cases, corporate gatekeepers bar access to decision-makers, and e-mails and phone calls simply go unreturned."
SME should adopt marketing strategies that are more targeted than traditional "cold call" approaches. They include the following:
- finding the right fit between the needs of multinationals and the products or services the SME supplies;
- participating in trade shows, industry conferences and other informal networking venues;
- cooperating with other SMEs through joint bids, information sharing and shared R&D investments; and
- getting in at a lower level (such as the second or third tier in the supply chain) and building up from there.
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.