Similarly, many small businesses in large equipment markets find themselves supplying production equipment to other manufacturers, and designing entire production lines, including the development of specifications as well as integration and maintenance responsibilities.

It's now common for suppliers to assume complete design responsibility for their materials or components as incorporated into the end product, as opposed to simply manufacturing to customer specifications.

Other small businesses are being asked to design a broader portion of the end product itself.

Both scenarios present challenges that small businesses are often ill-equipped to handle.

For example, more than 60 percent of small manufacturers and 40 percent of medium manufacturers lack a defined new product development and introduction (NPDI) process.

In most companies, ownership of innovation is distributed throughout the organization, but in small businesses this function is typically managed by a single senior executive or business owner.

Small businesses also often fail to manage and distribute information about product design and development with team members both inside and outside the firm, preventing timely data from reaching key decision-makers.

“One of the things that small companies tend to do poorly that is really important is a concept called the ‘fuzzy front end,'” says Dick Strojinc, director in the manufacturing and distribution consulting practice for RSM McGladrey, Inc., a national business, consulting and tax firm that is focused on small businesses.

“And that is the beginning stage of doing product development, getting a clear definition of what the end customer wants,” he added.

Strojinc says getting that initial phase correct helps to ensure that product development has a high success rate: “Big corporations are very good at doing that. It is a process that medium and small companies could do just as easily.”

Many small businesses are trying to get closer to customers for product development and other issues, with more than half of small business plants (59 percent) reporting “some integration” with their customers and 11 percent reporting “extensive integration,” compared to 61 percent and 10 percent of large-company plants.

But small businesses also need to get their own suppliers involved: Just 56 percent report some integration with suppliers and 8 percent report extensive integration, compared to 72 percent and 9 percent of large-company plants. Integration and closeness with suppliers and customers is more important now than ever because, with expanded supply-chain roles, come heightened risks and customers.

This article is adapted from Forging New Partnerships: How To Thrive in Today's Global Value Chain, written, presented and copyrighted by The Manufacturing Institute, the National Association of Manufacturers and RSM McGladrey, Inc.

The entire report and audio presentations associated with it are available at http://www.rsmallbusinessescgladrey.com/Industries/Manufacturing/forging-new-partnerships--how-to-thrive-in-today-s-global-value-/.

Your Expanded Role in the Value Chain

Beyond understanding the four main links, small businesses also must take a broader look at how their overall functions in the value chain are evolving. In this new world, business-to-business customers want to see small businesses expanding their roles and adding more value as a supplier, such as product development, inventory management and product support.

Small businesses need to seize this opportunity and create partnering possibilities, structuring longer-term agreements that provide stability and rewards commensurate with the new roles and risks they are assuming.

Forging new partnerships and thriving in today's global value chain is pushing more risks on to small businesses.

End-product quality and warranty issues are increasingly a supplier's responsibility.

That means that small businesses need to ensure the materials, ingredients and components they deliver to customers, as well as what they receive from their own suppliers, meet specifications.

Stories of flawed goods sourced from China — tainted wheat gluten, children's toys contaminated with lead-based paints and truck tires prone to disintegration — should put small businesses and all manufacturers on notice: How well do you know your supply base — and the quality of sourced goods?

Small businesses have a unique opportunity to position themselves as an alternative to foreign producers by emphasizing product and service quality as well as the verified integrity of their supply base. As regulators take harder looks at imports, particularly from China, small businesses need to strike now — and offer competitively priced products with the service and support levels (value added) that customers can't get from manufacturers in low-cost regions.

However, becoming the value-added, innovative supplier that is in demand in today's value chain forces small businesses to overcome several obstacles.