Technology Renaissance For Small Manufacturers

AS many of America's largest companies downsize, the smaller manufacturers that supply them are also adapting to new realities.

Firms are under pressure to cut costs and improve quality. They are finding that, to survive, they must learn to cooperate more closely with customers and even with competitors.

But if the pressures are great, so are the opportunities.

Technology, by reducing barriers to transportation and communication, is allowing many small, specialized companies to market their products globally.

Other firms find success in the opposite direction, working more closely at the local level with the larger manufacturers they supply. Chrysler Corporation is one of many big firms that view partnership with suppliers as a key to quality and product innovations.

The efforts of companies like Berkshire Plastics Network [see story to the right] and Jones & Vining [see story below] are part of a renaissance for small and medium-size firms.

Economist Dwight Lee of the University of Georgia says that companies "compete on the basis of organizational design." This era of rapid technological change makes it possible for small firms to use their specialized expertise to stake out far-flung markets or work closely with larger customers, he says.

A century ago the momentum was toward bigness, the "vertical integration" of production, such as the Ford Motor Company organization. "Now we're seeing downsizing," Mr. Lee says. "Firms very likely will get smaller."

Many big companies, struggling against nimbler rivals, can no longer afford to try to do it all by themselves, adds Stephen Rosenthal, director of the Manufacturing Roundtable at Boston University's School of Management. But Lee says that technology "slices both ways." While it makes it easier for big firms to contract work out, it also eases the flow of ideas within big firms.

The question of what kind of firm is most efficient today will not be settled by any armchair theory, Lee says, but by the give and take of the marketplace.

Two reports follow on how small and medium-size corporations in two very different industries - shoes and plastics - are teaching themselves new tricks as they strive to remain competitive.