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An Oasis of Creative Thought and Action in a Desert of Conflicting Policy (Associated Manufacturing Marketing Group Profile)

Written by: Jon Hansen

Article Overview: “From a domestic engagement perspective, public sector procurement practices are leading to an erosion of the overall supply base. This escalating level of erosion and its negative impact on innovation was initially presented as part of an October 2002 U.S. report by the Executive Office of the President. Specifically, the practice of contract bundling which resulted in a steadily decreasing number of Small – Medium enterprises receiving federal contracts was seen as a direct threat to the nation’s pool of “innovation and creativity.” This of course has paved the way for newer legislation which has resulted in agencies such as NASA unbundling contracts in an effort to make business more manageable for small enterprises, or groups of small enterprises.

An Oasis of Creative Thought and Action in a Desert of Conflicting Policy (Associated Manufacturing Marketing Group Profile)

“From a domestic engagement perspective, public sector procurement practices are leading to an erosion of the overall supply base. This escalating level of erosion and its negative impact on innovation was initially presented as part of an October 2002 U.S. report by the Executive Office of the President.

Specifically, the practice of contract bundling which resulted in a steadily decreasing number of Small – Medium enterprises receiving federal contracts was seen as a direct threat to the nation’s pool of “innovation and creativity.” This of course has paved the way for newer legislation which has resulted in agencies such as NASA unbundling contracts in an effort to make business more manageable for small enterprises, or groups of small enterprises.

In turn, the strength of the supply base domestically (of which innovation is a key tenet), lays the foundation for a sound national economy by equipping suppliers to compete more effectively in the emerging global economy.

In fact, a 2006 presentation by the Foundation for Advanced Studies on International Development (FASID) asserted that globalization will ultimately “reduce the number of industrial clusters in the world in each industry.” FASID concluded that “in an era of globalization, only efficient clusters can survive.”

Therefore, the inability to build strong clusters of innovation domestically will directly threaten a nation’s long-term viability to compete globally in key industries.”

From “Reader Question: Is a strong small business sector important to the stability and growth of a nation’s economy?” (by Jon Hansen, Procurement Insights Post, November 10th, 2007)

I watched last evening’s political debate between the federal leaders with great interest, and in particular the discussion surrounding our national economy. While the debate itself was lively, it was disappointing in that the broad brush strokes of idealistic throught accentuated by snappy sound bites such as “we have to get the jobs of the future,” provided little substance in terms of demonstrating a true understanding of the complexities that govern business in the emerging global economy.

I must admit that I am still unwilling to accept ITAC President Bernard Courtois’ assessment that the issues of domestic cluster development in terms of economic impact eludes the majority of senior bureaucrats and politicians. (Note: Mr. Courtois made this statement in an e-mail exchange regarding my August 28th, 2007 post “Public Sector Procurement Practice and the Principles of External Economies, Clustering and the Global Value Chain.) That said I would be hard pressed to provide compelling evidence that would contradict his position, at least not until I was introduced to Mike Bowes and his Associated Manufacturing Marketing Group (AMMG).

Practical Urgency

Leave it to one of the Atlantic Provinces (in this case New Brunswick), and in particular the participating private enterprises, to lead the way in terms of both recognizing, understanding and proactively responding to the evolutionary (some would say revolutionary) elements of an economy in transition.

A joint “venture” of what the AMMG web site refers to as “five well-established manufacturing firms,” this innovative, privately funded consortium’s main objective is to develop new business on a cooperative basis both domestically as well as internationally. Or as Mike Bowes so eloquently put it, “the AMMG is a private initiative which seeks to develop a collaborative, full-service supply chain network as a means to effectively identify and service viable export markets.”

Although the firms (A. Landry Fabrication, All-Tech Hydraulic & Mechanical, Hachey Construction & Fabrication, Johnson Enterprises and Sunny Corner Enterprises) operate within the areas of equipment fabrication and the assembly and installation for heavy industry and MRO support activities, what is compelling about the group is the model under which they have come together.

Certainly clusters of this nature are not necessarily new, however in the majority of instances their development have been historically driven by a centrally resident and somewhat monolithic enterprise “client.” This has meant that regardless of the “value chain’s governance” or framework, the model’s ultimate sustainability was tied to a specific customer or region. (Note: value chain governance, or the principles used to define and manage the relationship between external economy partners falls into one of three categories; a) network implying cooperation between firms of more or less equal power which share their competencies within the chain; b) quasi-hierarchy involving relationships between legally independent firms in which one is subordinate to the other, with a leader in the chain defining the rules to which the rest of the actors have to comply; c) hierarchy when a firm is owned by an external firm.)

In the case of the AMMG, its formation was predicated by the challenged New Brunswick economy which created a vacuum in terms of supplying traditional “central” enterprise clients. In short, you have a group of companies that have core compentcies which ranks amongst the best in the world, but lacked the necessary regionalized client base that is essential to ensuring the collective long-term viability of the sector. This of course is symbolic of the problem with political pontification that proclaims the need to “get the jobs of the future,” when we have failed to sustain the foundational capabilities of established industries and the jobs they create.

Industries which while not directly linked to the “emerging” knowledge-based sectors still represent, in a world of economic uncertainty, a foundation upon which a soundly diversified domestic economy is both built and maintained. But that is a discussion for another day and likely another venue.

A New Horizon

With opportunities in the Province of Alberta in the process of being successfully developed, AMMG is systematically looking to expand its opportunity net to include customers from other regions of the world.

Facing challenges such as rising fuel costs, in which the decision to maintain the manufacturing process within the “partners” home region can result in either a diminshed profit or reduced competitiveness, versus developing strategic satellite clusters in which a portion of the manufacturing process leverages local resources as a means of leveling the playing field, but potentially increasing the risk of quality control (refer to the Mattel tainted paint nightmare), AMMG is nonetheless a sound and proactive alternative to closing-up shop and forfeiting the hard-earned currency of expertise and experience in the New Brunswick manufacturing sector.

Especially given the fact that abandoning these traditional and indigenous Canadian “heritage” industries as a byproduct of both “tough economic conditions” and an evolving “knowledge driven” market is no guarantee that we will be in a better position to move into a 21st century global economy.

I am not suggesting that Canada ignore the emergence of the knowledge-based industries in which different skills and competencies must be nutured and fully developed, starting with the move away from the euthanizing shared services policy of the Federal Government’s procurement programs.

What I am saying is that models such as the AMMG should be enthusiastically embraced and more substantially supported as they enable Canada to leverage the manufacturing sector skill sets that are already in place, and globally recognized for uncompromising quality, and superior value.

Why AMMG?

For those of you who are part of my regular readership, you already know that an important tenet of the Procurement Insights Sponsorship Program (which includes these profiles) is my total commitment to neutrality. And as such I will continue to leave the assessment surrounding the viability of the AMMG value proposition entirely in your hands, (as always, I will direct you to the Link To Our Sponsors section of the PI Blog to investigate the AMMG offering in greater detail, and at your own convenience).

What I find compelling about the AMMG model is based largely on my direct and extensive experience in the critical areas of technological research and the new economy, SME development and the economic impact of government policy in an increasingly globalized marketplace.

With some financial assistance from government entities such as the Atlantic Canada Opportunities Agency (ACOA), an agency that “strives to help businesses get started and grow,” and the Province of New Brunswick, AMMG is representative of the can do attitude of a collaborative and collective mindset that shows the initiative that is necessary to adapt to changing domestic and international market conditions.

As a taxpayer, and more importantly as a Canadian, I fully support these kinds on initiatives which eschews the disposable move on, move up thinking that has far too often become the mantra for a myopic and apparantly insentive political apparatus.

Being mindful of the old Joni Mitchell song which goes, “you don’t know what you’ve got till it’s gone,” let’s get behind the AMMG model and those like it, not because it is just the right thing to do, but because it is the smart thing to do!

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Article Tags: broad brush, brush strokes, business sector, executive office of the president, fasid, federal contracts, federal leaders, global economy, industrial clusters, jobs of the future, jon hansen, key industries, national economy, office of the president, procurement practices, public sector procurement, reader question, small medium enterprises, term viability, unbundling



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