Integrating Quebec SMEs into Production Networks: A spur to Competitiveness

Download the PDF version

About this publication

Publication author : McGill University and Conference Board of Canada

Collaborator : Canada Economic Development for Quebec Regions

Publish date : July 25, 2012

Summary :

This report is the outcome of research by McGill University and the Conference Board of Canada to identify how Quebec-based small and medium-sized enterprises (SMEs) engaged in high-value-added manufacturing can work together to play an important role in the global value chains of multinational corporations. The report presents effective strategies for Quebec’s SMEs to successfully integrate their manufacturing expertise into production networks, outlines the potential benefits of active participation, and describes common challenges and practical solutions for overcoming them.

Table of Contents

  1. Acknowledgements
  2. Executive Summary
  3. Chapter 1 - Introduction
  4. Chapter 2 - Literature Review
  5. Chapter 3 - Strategic Choices for SMEs
  6. Chapter 4 - Aerospace Sector
  7. Chapter 5 - Information and Communications Technology Sector
  8. Chapter 6 - Fashion and Clothing Sector
  9. Chapter 7 - Consumer Applicance and Industrial Equipment Sectors
  10. Chapter 8 - Conclusions and Recommendations
  11. Appendix A - Bibliography

Acknowledgements

This report was prepared by The Conference Board of Canada, in collaboration with McGill University, with the financial support of Canada Economic Development for Quebec Regions.

Special thanks go to Alison Howard for her constructive feedback as the internal reviewer of the report.

We extend our thanks to the two external reviewers of this report: Dr. Saibal Ray and Dr. Onur Hisarciklilar, Department of Mechanical Engineering, McGill University.

The findings and conclusions of this report are entirely those of The Conference Board of Canada. Any errors or omissions in fact or interpretation remain the sole responsibility of The Conference Board of Canada.

About McGill University

McGill University is one of Canada’s best-known institutions of higher learning and one of the country’s leading research-intensive universities. With students coming from about 160 countries, McGill has a student body that is the most internationally diverse of any medical–doctoral university in Canada. McGill was ranked as the top university in the medical–doctoral category by Maclean’s magazine (2005–11), and it has been consistently ranked among the top 20 universities in the world by Times Higher Education.

Executive Summary

At a Glance

The trend toward a single world market for labour, capital, goods, and services, coupled with the breakdown of the vertical integration characteristic of multinational corporations (MNCs), is an important feature of the modern economy. These changes are leading to vast transformations. Industries and firms that were formerly stable and competitive have had to evolve or disappear. Large companies have had to find ways to leverage the best available resources on a global scale. Smaller-scale companies have had to determine how they can best compete in an open market and overcome significant challenges caused by large differences in the costs of labour and materials around the world.

It is through the non-linear/horizontal relationships in a value chain that the core sources of value are developed and enhanced.

This report analyzes the way in which Quebec participants in integrated production networks, both MNCs and small and medium-sized enterprises (SMEs), cooperate to make high-value-added products and associated services. Specifically, the research focuses on how groups of SMEs can work together to play an important role in the global value chains1 of MNCs through integrated production networks. Examples of successful strategies from different industries illustrate how firms, communities, regions, and countries have coordinated their resources, skills, and talents to transform themselves successfully.

Production networks are often viewed as sequential value chains that create value by transforming material and non-material inputs into goods and services. However, “each stage of a production [value] chain is also embedded in sets of non-linear/horizontal relationships” or networks within an industry or group.2 It is through these horizontal relationships that the core sources of value are developed and enhanced.3 The governance of value chain networks varies depending on the following factors: the complexity of the information required, the extent to which this information can be transmitted with little transaction-specific investment between parties, and the requirements of the transaction relative to the capabilities of actual and prospective suppliers.4 The composition of the network as well as key determinants are useful in strategically aligning a company’s capabilities within a production network.

The sectors in this report differ in how companies within them operate and interact, but the production networks within all of them can grow and thrive.

Regionally cohesive production networks are known as clusters. Numerous studies have demonstrated that “competitiveness can be enhanced in geographically concentrated and sector-specialized industrial clusters.”5 Clustering affects competitiveness by increasing productivity, fostering innovation, and stimulating new business formation. “Each of the three broad influences of clusters on competition depends to some extent on personal relationships, face-to-face communication, and interaction among networks of individuals and institutions.”6 The productivity of a cluster depends on access to specialized inputs and employees, access to information, the generation of complementary products for buyers, marketing complementarities, better alignment of activities among cluster participants, access to institutions and public goods, incentives, and performance measurement.

Although the sectors described in this report differ in how the companies within them operate and interact, as well as in the industry requirements and challenges they face, we have seen that production networks in every sector can grow and thrive with the following ingredients:

MNCs can initially act as a source of orders for items (such as components in the aerospace sector or software applications in the information and communications technology sector), providing steady business streams for SMEs as they grow their capabilities to provide better quality and more reliable products, offer more value-added services, and develop their own products. The presence of MNCs is an important factor in the development of knowledge and experience in various industry sectors, often leading to the founding and success of spinoffs.

SMEs should upgrade their capabilities and productivity by hiring highly trained people, consulting with experts, and investing in process improvement.

In order to obtain market information about what clients need in terms of products, services, and performance levels, SMEs must communicate with their customers and MNCs. SMEs should use various forums where they can share information about their products and learn about markets, technologies, and expected quality. SMEs also need to improve their knowledge about access to financial support for starting ventures or investing in improvements. These types of encounters are valuable in raising the bar within industry sectors.

Recommendations

... for SMEs

  1. SMEs in traditional manufacturing sectors should obtain more information about the needs of potential clients by participating in trade associations and sector-specific networking events that include these clients.
  2. SMEs should communicate with other companies in the region about common issues in order to improve the performance of their sector as a whole. Joining trade associations or forming new trade associations where none exists is an effective means of gaining knowledge about markets, performance standards, technical issues, and common challenges.
  3. SMEs should position themselves in the value chain at the point where they can be most competitive, leveraging their knowledge, capabilities, proximity to customers, and workforce to provide value-added services and high-value manufacturing. One way to accomplish this is to focus on identifying opportunities for growth within the supply chains of MNCs based in Quebec or that carry out a large part of their supply chain procurement in Quebec. This would provide a practical commercial basis for decisions about modifying product and service offerings.
  4. SMEs should aim to provide world-class services and products by upgrading their capabilities and productivity. They can do this by hiring highly trained people from universities and technical schools, consulting with experts, and investing in process improvement.
  5. SMEs should travel internationally to inform themselves about the level of products and services their customers are obtaining from global competitors.
  6. SMEs should learn about opportunities that governments provide to meet domestic and foreign companies in their sector, and they should participate in trade missions to other countries to obtain information on potential customers and products.
  7. SMEs should strengthen ties with institutions such as technical schools, universities, and research centres to take advantage of the new knowledge available.

... for Governments

  1. Governments at different levels should work together to improve the links between local MNCs and potential SME suppliers in the same region. This could be accomplished through the creation of sector-based, non-profit industry organizations that support industry-sector production by providing a forum for strategic planning, gathering information about funding and business opportunities, and marketing the local cluster, as well as organizing networking events to promote the collaboration needed to improve the competitiveness and growth of an industry sector. A successful organization that could be used as a model is Aéro Montréal from the aerospace sector.
  2. Governments should work with industry organizations whose members have global supply chains. The key here is to identify areas of product and service supply that could be provided by Quebec-based SMEs if they were made aware of the opportunity and were able to find SME partners to create offerings for MNCs.
  3. Governments should take the lead in coordinating education and immigration programs to increase the supply of appropriately skilled talent. This measure would enable SMEs to grow their pool of employees with advanced skills and thereby increase organizational capacity. In addition, adding skilled and knowledgeable immigrants would enable SMEs to better recognize and take advantage of business opportunities both domestically and internationally.
  4. Governments should consider a variety of initiatives that would further develop Quebec as a centre of quality manufacturing, innovation, and excellence. For example, initiatives could be set up to:
    • assist financially via incentives, loans, and tax credits;
    • encourage closer ties between targeted sectors and regional educational institutions that provide training in manufacturing, management, and marketing; and
    • promote industry networking events that would enable potential SME suppliers to connect with MNCs in the region to better understand their requirements and the opportunities they represent.

Chapter 1 - Introduction

Chapter Summary

Every day we see evidence of the tight integration of world financial markets. Not only is the financial world highly integrated, but markets for goods and services are also integrated across the world. Multinational corporations (MNCs) operate global supply chains that coordinate the expertise of many companies to create components and services that are incorporated into products. As a consequence, MNCs have had to redefine themselves in the global context. Companies have been focusing on “innovation and product strategy, marketing, and the highest value-added segments of manufacturing and services, while reducing their direct ownership over [redefined] ‘non-core’ functions such as generic services and volume production.”1

Large companies are finding ways to leverage their resources on a global scale, but small and medium-sized enterprises (SMEs) are hard-pressed to find their niche in the global marketplace. Open markets and regional differences in the costs of labour and materials, along with differences in corporate governance, present significant challenges to any company let alone an SME. Nevertheless, there are many examples of successful strategies from different industries that illustrate how firms, communities, regions, and countries have coordinated their resources, skills, and talents to succeed in transforming themselves to compete globally.

The research described in this report analyzes how integrated production networks—where MNCs and SMEs cooperate to make high-value-added products and associated services—contribute to the productivity and competitiveness of MNCs and SMEs in Quebec. Specifically, the research focuses on how groups of SMEs can work together to play an important role in the global value chains of MNCs. We identify effective strategies that Quebec SMEs can use to integrate themselves into production networks, the potential benefits of active participation in these networks, and common challenges and practical solutions for overcoming them. These strategies and solutions are intended to provide economic stakeholders (e.g., companies and governments) with information and analysis that they can use to promote investment and economic growth.

This report is structured as follows:

1 Gereffi, Humphrey, and Sturgeon, “Governance of Global Value Chains.”

Chapter 2 - Literature Review

Chapter Summary

Dicken defines a production network as the “nexus of interconnected functions and operations through which goods and services are produced, distributed, and consumed.”1 Production networks are focused on specific firms and can be organized and configured in a variety of ways. An industry often comprises several different production networks.

An organization’s “position within a production network is defined both functionally (by the nature of its product) and organizationally (by its ownership or varying degrees of non-ownership of another firm’s operations).” None of these positions is necessarily fixed, since “sourcing decisions by firms—whether to perform a particular function in-house or to [outsource] it to outside firms”2 are not irreversible.

To further situate the notion of a production network, it is useful to consider the definition of a value chain. According to Kogut, a value chain is the “process by which technology is combined with material and labour inputs, and then processed inputs are assembled, marketed and distributed. A single firm may consist of only one link in this process, or it may be extensively vertically integrated.”3 The “key issues are which activities and technologies a firm keeps in-house and which should be outsourced, and where the various activities should be located.”

Production networks are often viewed as sequential value chains, creating “value through the transformation of material and non-material inputs into demanded goods and services.”4 However, “each stage of a production chain is [also] embedded in sets of non-linear/horizontal relationships”5 or networks within an industry or group. It is through these horizontal relationships that three core sources of value are developed:

For example, it is through social structure that intra-industry coalitions of firms such as cartels, trade associations, and cooperatives are thought to emerge. Learning occurs in networks from the spillover of knowledge specialization between different firms and from cooperation between companies to create and refine a particular body of knowledge in a systematic way. Network externalities occur when, for example, there are increasing benefits in adopting a technology as the number of adopters increases.

The three-dimensional concept of production networks illustrated in Exhibit 1 is useful in that it stresses the “complex nature of the interdependencies that exist within production networks.”7 There are pooled and sequential dependencies between different layers in a production network, and reciprocal dependencies between firms in the networks at each level. The interdependency of suppliers is vitally important in cases where SME suppliers have direct contact only with other suppliers and not with manufacturers or distributors.

Consideration of the inter-organizational dependencies on each level of the production network points to the benefits for firms of developing social ties and positioning themselves to take advantage of new information and diverse knowledge.

The interdependency of suppliers is vitally important where SME suppliers have direct contact with other suppliers, but not with manufacturers or distributors.

Consideration of the dependencies between the layers of production networks takes us to questions of coordination and control, sometimes referred to as network governance and power relationships. To explore these questions, we turn to the literature on production networks—or value chain networks as they are commonly called.

Governance in Value Chain Networks

Value chains are defined “as a set of sequential, vertically organized transactions representing successive stages of value creation.”8 In the global value chain literature, governance of value chain networks was initially conceptualized into two types: buyer-driven and producer-driven.9 More recently, a more complete typology of five basic types was proposed based on the results of many empirical studies of global value chains.10

At one end of the typology is a market-based relationship among firms; at the other end is the vertically integrated firm (hierarchies). The intermediate modes of value chain governance in the typology are composed of network relationships made up of three distinct types: modular, relational, and captive. (See Table 1.)

Exhibit 1
Three-Dimensional Model of a Production Network

Exhibit 1 is a Three-Dimensional Model of a Production Network. First the suppliers are link to the manufacturers. Then, they send their product to the distributors who sale it to the consumers.

Source: Lazzarini, Chaddad, and Cook, “Integrating Supply Chain and Network Analyses.”

The type of governance that arises is determined by the following conditions:

The five types of value chains and the values of the three conditions that determine them are highlighted in Table 2. In addition, the fourth column in the table shows the amount of explicit coordination required. The typology and key determinants are useful to SMEs in aligning their capabilities within a production network. By examining the characteristics of the products that an MNCs wants to outsource, an SME can strategically align its actual or prospective capabilities to fit itself into the production network where it can be most competitive.

Table 1
Types of Governance Found in Global Value Chains

Governance type
Markets
Features
Costs of switching to new partners are low for both sides.
Governance type
Modular value chain
Features
Suppliers make products to customer specifications, which may be of varying detail. When providing turnkey services, suppliers take full responsibility for competencies surrounding process technologies, use generic equipment rather than having to invest in specific processes, and make capital outlays for components and materials on behalf of customers.
Governance type
Relational value chain
Features
Complex interactions exist between buyers and sellers that often create mutual dependence and high levels of asset specificity. Spatial proximity is important in this type of linkage, but trust and reputation might function equally well.
Governance type
Captive value chain
Features
Small suppliers are transactionally dependent on much larger buyers. Suppliers face significant switching costs and are therefore captive. Such networks are characterized by a high degree of monitoring and control by lead firms.
Governance type
Hierarchy (vertical integration)
Features
The dominant form of governance is managerial control flowing from managers to subordinates or from headquarters to subsidiaries and affiliates.
Source: The Conference Board of Canada, modified from Gereffi, Humphrey, and Sturgeon, “Governance of Global Value Chains.”
Table 2
Key Determinants of Global Value Chain Governance
Value chain governance type Complexity of transactions Ability to codify transactions Capabilities in the supply base Degree of explicit coordination and power asymmetry
Markets Low High High Low
Modular value chain High High High Medium-low
Relational value chain High Low High Medium
Captive value chain High High Low Medium-high
Hierarchy (vertical integration) High Low Low High
Source: The Conference Board of Canada, modified from Gereffi, Humphrey, and Sturgeon, “Governance of Global Value Chains.”

External Connectivities of Production Networks

Transnational production networks are influenced by a myriad of international, national, and local standards and regulations. For example, in order to gain competitive advantage, MNCs sometimes try to benefit from “national differences in regulatory regimes, such as taxation or performance requirements.”12 Furthermore, countries and regions try to attract global investment through competitive bidding against other states; so trade agreements between countries often impose requirements on governments to minimize such “regulatory arbitrage.” In this regard, Stopford and Strange state that “in the relationships between MNCs, states, and other institutions, the outcome of specific negotiations is highly contingent.”13 Partly because of this complexity, there is a strong tendency for the geographic extent of production networks to be regionally cohesive.14 Regionally cohesive production networks are known as clusters.

Regional Clusters

Since the 1980s, “many studies have shown that competitiveness can be enhanced in geographically concentrated and sector-specialized industrial clusters or districts.”15,16 Nadvi and Halder state that:

The allure of the cluster approach lies in its promise for small-scale industry and the importance it attaches to local linkages. It shows that, with economies of agglomeration and local joint action, SMEs can compete alongside large firms and in global markets. Cluster-specific external economies include the presence of skilled labour, specialist suppliers, and knowledge spillovers. Economies of scale and scope emerge when firms concentrate on particular processes and produce complex goods by interacting with each other. High levels of organizational flexibility within small firms lead to further cost advantages. Finally, local joint action between firms and through local institutions can enhance the capacity of small firms and raise a cluster’s competitiveness.17

Clustering affects competitiveness by increasing the productivity of the firms and industries within the cluster, fostering innovation among cluster participants, and stimulating new business formation and cluster expansion. “Each of the three broad influences of clusters on competition depends to some extent on personal relationships, face-to-face communication, and interaction among networks of individuals and institutions.”18 The productivity of a cluster depends on access to specialized inputs and employees, access to information, the spillover generation of complementary products for buyers, marketing complementarities, better alignment of activities among cluster participants, access to institutions and public goods, incentives, and performance measurement.

A new business is more easily formed at a cluster location because barriers to entry are often lower there than they are elsewhere.

Innovation occurs in a cluster more frequently because firms within it often perceive new buyer needs more clearly and rapidly. They are “exposed to richer insights into evolving technology, [process improvements], component and machinery availability, and service and marketing concepts.”19 The relationships with other firms and institutions in the cluster facilitate such learning. The isolated company faces difficulties in obtaining insights and higher costs in acting upon them.

A new business is more easily formed at a cluster location because such locations offer better information about opportunities and because barriers to entry are often lower than they are elsewhere. For example, “needed assets, skills, inputs, and staff often are readily available at the cluster location and are assembled more easily there.”20 As well, financial assistance is often less costly at a cluster location because of investors’ familiarity with the local industry.21 The ease of forming a new business helps to accelerate innovation within a cluster; whereas larger firms frequently face constraints and barriers when innovating, spin-off companies often take on the role of innovator.22

Benefits and Challenges for SMEs Working With MNCs

A recent report by The Conference Board of Canada described in detail the benefits and challenges for SMEs working with MNCs in Canada.23 The main benefits for SMEs are:

The main challenges are:

In addition, the report indicated that SMEs can help themselves by connecting with MNCs through personal contacts, trade fairs, and industry conferences, as well as associations and sector councils. These mechanisms were cited as the most effective means of getting “face to face” with the right decision-makers.

Officials in economic development agencies and trade commissions were identified as being helpful in indicating the most useful events for connecting with the right people. Other recommendations were for SMEs to invest in high-quality marketing strategies targeted at MNCs, focusing on their core competencies and demonstrating their ability to provide the quality and level of service required by their clients.

The report listed a number of government departments, agencies, Crown corporations, and other organizations in Canada that provide SMEs with assistance in expanding within Canada and abroad. These sources can help with financing and risk management; provide information, guidance, and consulting services; and furnish contacts and networking opportunities.24

Chapter 3 - Strategic Choices for SMEs

Chapter Summary

In order to expand their business, SMEs in Quebec can focus on marketing their existing offerings based on knowledge of their clients’ needs and their own capabilities, or on improving their own capabilities to expand their offerings and thus meet additional customer needs. Using the framework described in tables 1 and 2, we can examine the possible strategic choices.

Proximity between an MNC and an SME supplier is less important when the parts are high-value or high-volume and lightweight (such as electronics).

Products Are Easily Specified

If the product is low in complexity and the specifications can easily be agreed upon, the governance of the supply chain is via markets. In this case, SMEs must compete on price and delivery terms. Proximity is important where volume is low and transportation is costly (e.g., in the automotive and heavy machinery sectors). It is less important where parts are high-value (e.g., in the electronics and aerospace sectors) or high-volume and lightweight. In order to compete effectively where delivery time or cost is not critical, the SME must overcome higher labour costs with higher productivity and more efficient processes.

Moving to a Modular Supply Chain Position

If an SME is capable and willing to invest, it can move toward a modular value chain position. It can do this if it can adopt methods and technologies that enable it to provide assemblies of higher complexity on a turnkey basis. Complex product data codified by the client MNC must be interpreted efficiently and accurately into production instructions. Machinery needs to be flexible and easily set up to produce a diversity of parts. The purchasing, receiving, and quality control functions must be in place in order to provide full-service assemblies to the client MNC.

An SME can develop new offerings for an MNC that it is already supplying, but it must carefully consider the offerings to understand its competitive advantage.

MNCs increasingly look for ways to outsource parts of their manufacturing processes in order to reduce risk in the face of rapidly changing markets, gain efficiencies, and focus on core value-added parts of their processes. Outsourcing can also greatly speed up new product development. Outsourcing for complex products is more cost-effective when the knowledge and information required to complete the transaction can be codified. This is being done in global markets with the innovative use of technology and standards. Examples of such “modularity” are ubiquitous in the electronics industry and can increasingly be found in other industries such as the automotive, apparel, toy, and data-processing industries.

The Apple iPod combines components that were already being made by other companies, and thus the iPod was able to move from concept to market in less than a year. The vital parts of the iPod include a hard drive made by Toshiba, a disk drive spindle made by Nidec, “an ARM core processor, a Texas Instruments firewire controller, a USB interface chip from Cypress, and flash memory from Sharp.”1 Final assembly is done by a Taiwanese contract manufacturer.

Anagram Corp. in Minnesota makes inflatable metallic balloons by making the main body of the balloon in its own plant, buying decorative trim made for it in China, and attaching the trim to the balloon in a plant in Mexico.

“Carmakers now ask their suppliers to provide whole subassemblies like dashboards with all the switches and displays, air-conditioning units, or drive trains with engines, transmissions, and axles.”2 In an effort to “de-verticalize” their operations, automakers have found ways to gain efficiencies by outsourcing modules that can be built in separate facilities and then pulled together on the final assembly line.

An SME in Quebec, formerly providing fibreglass and plastic parts designed by its clients, now designs and builds low-pressure air systems for specialized applications based only on specifications provided by its client MNCs. These specifications include complex three-dimensional spaces that the airflow must traverse.

An SME can develop new offerings for an MNC for which it is currently providing parts. However, the SME must first carefully consider the offerings to understand its competitive advantage. For example, in many cases, proximity to the MNC confers an advantage because it enables faster and less costly delivery. In addition, the SME must consider whether its offering is based on knowledge and skills that are harder to come by in developing countries. If it is, the SME can develop a global, competitive advantage that does not depend heavily on low cost.

Products Are Not Easily Specified

When the complexity of product specifications is high, and knowledge and information cannot be codified, stronger and closer relationships between capable SME suppliers and MNCs must be established. A significant investment in client-specific equipment may be required, as well as more frequent and intense communication. In this case, the close proximity of an SME to an MNC is an advantage and may even be a necessity. If an MNC cannot find a suitably qualified company for outsourcing a process, it tends to retain that process in-house. An SME with a strong trust relationship with an MNC client may be able to move toward a relational value chain position if it has a sufficiently long and successful record of reliability and performance.

A captive supply chain governance relationship may or may not be advantageous for an SME, depending on whether it can grow to be more competent.

For various reasons (e.g., a high in-house cost structure), an MNC may want to outsource certain parts. If the MNC has the ability to codify the process or product specifications, but cannot find a capable SME, there is a tendency to move toward captive supply chain governance, where “low supplier competence in the face of complex products and specifications requires a great deal of intervention and control [by the MNC].”3 This may or may not be advantageous for the SME depending on whether it can grow to be more competent.

Evolution in Supply Chain Structures

The governance structures of supply chains evolve as the capabilities of companies improve and the means of knowledge transfer and information codification advance. At any point in time, an MNC may be operating in a vertically integrated fashion, but as the codification of its processes becomes more achievable, competitive conditions lead it toward some form of outsourcing to specialist firms. If local firms are not available to participate in the outsourcing, the MNC looks outside its region for suitably qualified suppliers.

The disaggregation of MNCs’ operations into horizontal supply chains represents an excellent opportunity for SME manufacturers in Quebec, which can take advantage of relatively low barriers to entry to participate in global markets via the MNC. Where large, vertically integrated MNCs would once have hired suitably qualified engineers and technicians to build and operate their in-house manufacturing capabilities, disaggregation of operations offers smaller companies the opportunity to own and operate their own manufacturing venture. This change in industrial organization, the increasing availability of qualified individuals in Quebec, and the proliferation of local networking possibilities are creating fertile ground for the development of a thriving Quebec-based regional cluster of manufacturing companies competing in global markets.

Government policies aimed at promoting closer ties between qualified individuals, sources of financial support, business advice, and knowledge centres such as universities and research institutes are evident in Quebec. Examples can be found in the promotion of industrial clusters in the Montréal area by the City of Montréal,4 the Laval Technopole,5 and the ACCORD project of the Quebec government.6. These initiatives address some of the requirements for the development of clusters. However, there is also a requirement for a critical mass of knowledge and skills in a region in order for it to develop into a successful industrial cluster in a particular sector. Development of this critical mass takes time and a sustained period of economic activity in each sector.

Quebec’s aerospace sector, which is a very successful cluster in that province and the third largest aerospace centre in the world, is the result of industrial activity by companies such as Bombardier (previously Canadair), CAE Inc., CMC Electronics, Pratt & Whitney Canada, Rolls-Royce, and others, which have been operating in the Montréal region for well over 50 years. The presence of companies such as these has given rise to a pool of skilled workers that has grown in size, and sophistication over several generations. It is the combination of skill, diversity of expertise, size, and co-location that has led to the development and success of this cluster. Newer clusters in areas such as ICT, life sciences, agri-food, multimedia, clean technologies, and others require the development of the requisite skills and knowledge in the population participating in these clusters.

Our findings show that SMEs that have invested in acquiring and developing skills and knowledge in their companies have succeeded in integrating themselves into production networks. Those that have hired highly skilled graduates with degrees in engineering, operations management, marketing, and business development have been successful in developing new business, implementing quality and reliability programs, improving their manufacturing processes, and developing in-house product development capabilities. It is the combination of experienced people and those with new knowledge that can lead to the development of SMEs and provide the knowledge and skills base required to build up and sustain a cluster.

Chapter 4 - Aerospace Sector

Chapter Summary

This chapter focuses on Quebec’s aerospace sector, describing an MNCs (Bombardier Aerospace) and its relationships with suppliers in its production network, an industry association (Aéro Montréal), and three manufacturing SMEs. It also presents insights obtained from interviews with people in the aerospace sector.

Bombardier Aerospace

Corporate Overview

Bombardier Aerospace operates in 23 countries and is a global leader in the “design, manufacture and support of innovative aviation products for the business, commercial, specialized and amphibious aircraft markets.”1

The company is aware of the need to develop new products that meet the evolving needs of its customers while providing superior value and service. Bombardier invests in its people and products to drive innovation, product safety, efficiency, and improved performance. Its mission is to “be the world’s leading manufacturer of planes and trains.”2 Currently, it is the world’s third largest manufacturer of aircraft.

Managing Suppliers

Bombardier works strategically with a few major suppliers in order to establish strong long-term relationships rather than transaction-based ones. A smaller number of key suppliers makes it easier for the company to work with them directly, helping them develop over time and make ongoing improvements. Formal development plans are established for each supplier, and their progress is evaluated and tracked.

Bombardier uses computer-based planning systems that ensure all their suppliers keep up-to-date on what they need to deliver and at what time.

The company uses a tiered system to manage its suppliers. It works very closely with its tier 1 suppliers and communicates with them regularly. These suppliers, in turn, are responsible for working and maintaining communication with a group of lower-tier suppliers.

Various forms of communication are used to coordinate with suppliers. Bombardier has formal meetings and executive reviews with key suppliers several times a year. It also has weekly teleconferences and communicates daily using more informal means such as e-mail and phone calls. The level of communication varies depending on the supplier, the program or product line being supplied, and the phase of the program. Monthly program reviews are conducted with key suppliers to evaluate performance and progress, especially within development programs. In addition, a large forum is held each year to bring together all of Bombardier’s strategic suppliers to share information.

As a just-in-time organization, Bombardier uses computer-based planning systems to ensure all suppliers are up-to-date on the specifications of what they need to deliver and at what time. The system provides suppliers with the lead times on all parts so that they can adjust their production schedules accordingly.

In addition, Bombardier keeps its key suppliers updated with inventory forecasts. Because this information is highly sensitive and confidential, instead of providing written documents, the company uses executive review sessions and an annual forum to communicate any insights that it may have on future inventory requirements and specifications.

Bombardier uses a range of methods to measure the quality of its suppliers, including scorecards, key performance indicators on delivery, and measures of on-time delivery and quality. The company will work with a supplier to identify any issues and areas for improvement and to solve these issues and improve performance.

How Bombardier Finds New Suppliers

Bombardier is organized by commodity. For each commodity, an employee within the company is responsible for “enlisted commodity profiling.” These employees continuously scan for new potential suppliers and what is currently available in the market. Because Bombardier is a large player in the aerospace industry, it tends to hear about suppliers who have new capabilities and specializations to offer. Employees also take part regularly in forums all over the world in an effort to stay up-to-date.

Companies that want Bombardier to consider them as potential suppliers can use an online portal to submit a corporate profile outlining their capabilities. The profiles are then filtered to identify suppliers that specialize in the right areas. New suppliers often go through a competitive bidding process, but price is not Bombardier’s sole criterion. It tends to assess the competitiveness of each supplier and looks for a good technical fit. Some additional criteria it assesses are manufacturing capabilities, degree of lean manufacturing, corporate social responsibility requirements, code of conduct, and financial viability.

When evaluating price, Bombardier focuses on total life-cycle costs. Production price is only one of the elements considered. The company also looks at insurance, escalation mechanism, warranty conditions, preference guarantee, and mean times between failure and removal, for example.

Aéro Montréal’s MACH initiative provides SMEs with tools and techniques to evaluate their own competitive situation and identify opportunities for improvement.

Bombardier provides suppliers with its criteria and specifications. It is then up to the SME suppliers to work together to meet Bombardier’s needs. If Bombardier can identify a strategic synergy or relationship between two suppliers, it might introduce the companies to each other. For the most part, however, building strategic relationships is the responsibility of the SME suppliers. Bombardier never forces strategic partnerships among its suppliers.

Working With Aéro Montréal to Develop More SME Suppliers

Bombardier is working with Aéro Montréal on its MACH initiative, which aims to help manufacturing SMEs in the aerospace industry become more efficient and competitive. The project provides SME suppliers with the tools and techniques needed to evaluate their own competitive situation, identify opportunities for improvement, and take appropriate action.

The initiative benefits Bombardier because, as SMEs in the industry get stronger, the company will have access to better local suppliers. Its main interest is in raising the bar for the whole industry. It is a competitive advantage for Bombardier to have good, reliable suppliers that are close by. Claire Auroi of Bombardier Aerospace notes, “For Bombardier, having efficient suppliers in Quebec and Canada is always a win for us.”3

Aéro Montréal

Corporate Overview

Aéro Montréal is an industry-driven organization that brings together all the companies in Quebec’s aerospace industry, as well as the educational and research institutions, unions, and associations that contribute to the development of this strategic sector. It aims to foster and maintain an environment conducive to increased productivity and accelerated growth in the aerospace sector.

The mandate of the agency is to:

  • mobilize all the players in the aeronautic and space sectors;
  • coordinate the development, approval, and follow-up of the implementation of the cluster’s strategic plan;
  • foster coherence and cohesion of the sector’s representation among governments, the public, and the media;
  • promote the cluster’s profile and visibility in the local, national, and international arenas;
  • initiate projects that add new value or capability to the cluster;
  • foster synergies and optimize the impact of actions and contributions by existing organizations, institutions, and associations in alignment with the objectives, priorities, and projects of the cluster; and
  • support the interests of cluster partners.4

How It Operates

Aéro Montréal was created in 2006 through funding provided by the Communauté métropolitaine de Montréal (CMM), which had targeted aerospace as 1 of 15 potential industries for cluster development. Aéro Montréal has been working for the past six years with industry and other major stakeholders on macro-level projects. The agency is currently funded through various government and industry groups.

Aéro Montréal represents a mix of multinational companies (Bombardier, Bell Helicopter, CAE Inc., Pratt & Whitney Canada), integrators (12 companies), and SME suppliers (234 companies). The agency works to develop programs and macro-projects that benefit the aerospace industry as a whole by focusing on building supplier relationships. It often works closely with MNCs to better understand their needs and how smaller-scale suppliers can improve operations and offerings to better meet these needs.

Driving Improvements in the Aerospace Industry MACH Initiative

Aéro Montréal created its MACH program to help SME aerospace suppliers become more efficient and competitive. MACH aims to strengthen the supply chain structure and companies involved in it by creating special collaboration links among customers and suppliers. It also promotes the implementation of strategies and projects that help fill in existing integration gaps in the Quebec aerospace supply chain.5

Some SMEs act as systems integrators, which are essential to the supply chains of the aerospace industry.

The program provides a framework to help suppliers evaluate their situations, pinpoint improvement opportunities, and take appropriate action. Specific areas for improvement are aerostructures, avionics, cabin interiors, and hydraulic systems.

SME suppliers also have the opportunity to be mentored by one of six major aerospace manufacturers, including Bombardier Aerospace. Mentors follow and guide SME suppliers to help them develop efficient production and planning capacities, focusing on leadership, workforce development, and cooperation. These efforts help suppliers to take on larger roles as systems integrators. Integrators are essential to the supply chains of the aerospace industry, because they help to coordinate and manage a group of smaller-scale suppliers to better meet the needs of large multinational manufacturers.

The MACH program offers the following services to SME suppliers:

  • assessment of organizational performance;
  • support to carry out continuous improvement;
  • tailored training programs;
  • mechanisms for performance measurement and benchmarking at the national and international levels;
  • tools for disseminating information and strategic intelligence; and
  • a “visibility” plan that promotes companies both nationally and internationally by showing how they have improved their performance.6

In addition, the MACH program continuously evaluates suppliers, awarding “gold,” “silver,” and “bronze” ratings. These ratings show both progress and gaps in performance and help SME suppliers to better focus in order to connect with and supply large multinational manufacturers.

Suzanne Benoît, CEO of Aéro Montréal, indicates that the “development of initiatives focused on the supply chain, such as MACH, is part of a global trend being seen in the industrial orientation programs of developed countries such as the United Kingdom, France, Germany and the United States.”7

Cluster Working Groups

Aéro Montréal has also developed the following cluster working groups to help improve the competitiveness of companies operating in the aerospace industry:

  • Supply Chain Development Working Group: responsible for planning, coordinating, and implementing an action plan that addresses major issues related to subcontracting. The ultimate goal is to enhance the competitiveness of Quebec’s aerospace subcontractors.
  • Branding and Promotion Working Group: aims to increase awareness of the Greater Montréal aerospace sector, including its players and competitive advantages, and to improve its visibility and outreach.
  • Innovation Working Group: works to establish an aerospace innovation strategy for the Greater Montréal region. It also identifies and coordinates support projects for this innovation strategy in collaboration with other organizations involved in innovation to ensure that the efforts of all players are optimized.
  • Human Resources Working Group: responsible for planning, coordinating, and implementing an action plan to address the major issues of aerospace leadership succession and human resources and, ultimately, increase the industry’s competitiveness.
  • National Security and Defence Working Group: works to analyze the overall Canadian security and defence sector and deliver a strategic plan aimed at optimizing the competitiveness, growth, and influence of Aéro Montréal members.8

Common Challenges for SME Suppliers

From Aéro Montréal’s perspective, SME suppliers face various challenges in the aerospace industry, most of which stem from limited financial resources. This restricts the ability of SMEs to invest in skilled workers and equipment, which in turn limits corporate growth and overall competitiveness. The large impact of globalization on manufacturing today makes financial investment even more vital to the competitiveness of smaller companies.

A major challenge for SMEs lies in attracting and recruiting qualified workers. Larger manufacturing companies have an easier time attracting skilled labour because they can offer higher salaries. SMEs are often not able to compete with large companies to recruit top talent.

Similarly, SME suppliers find it difficult to make significant investments in manufacturing equipment and process improvement. In order to compete with other local and global manufacturers, SME suppliers need to find strategies to keep prices down. Although one way to do this is to invest in more efficient processes and automated equipment, the initial investment may be beyond the reach of some smaller manufacturers because of the time needed to realize a return on investment. Moreover, this is often not a viable scenario for suppliers that do not have the financial resources to take on the risk of large investments.

Corporate development and growth in the aerospace industry requires significant investment. Aéro Montréal has observed that some SME suppliers tend to be risk-averse and are not always willing to invest to attain growth. Moreover, as they approach retirement age, some entrepreneurs may be hoping to sell their companies and consequently may be reluctant to take on new risks associated with achieving corporate growth. As the industry changes, it becomes more imperative for SME suppliers to act as specialists in their area of expertise or to grow and act as systems integrators. Suppliers cannot compete if they do not continually invest in improvements.

Suppliers need to understand their own strengths and weaknesses and to determine the most lucrative business opportunities to focus on.

Finally, when working with MNCs, SME suppliers can find it challenging to match the sophisticated computer-based planning systems used by multinationals. Some suppliers use simple Excel spreadsheets to track and manage their production plans; however, large manufacturers can impose specific criteria on their suppliers with regard to planning and execution, and if individual companies cannot meet the criteria, they cannot act as suppliers.

Potential Areas for Improvement

Aéro Montréal has found that SME suppliers tend to be quite good at production activities but need to direct more effort at improving strategic planning capabilities. For instance, suppliers need to better evaluate which lines of business to focus on. They need to understand their strengths and weaknesses and to determine the most lucrative business opportunities. It is important for smaller suppliers to centre their efforts on becoming specialists and to gain expertise quickly if they are to become more competitive.

Aéro Montréal has also observed that SME suppliers in Quebec tend not to hire consultants to make productivity improvements. In an effort to save costs, company owners sometimes spend much time trying to make improvements themselves. They fail to understand that it is typically more efficient and cost-effective to pay an expert consultant to find and oversee process improvements. By hiring a consultant, an SME can ensure the right job is done and done right the first time.

DCM Aerospace

DCM Aerospace’s mission is to “manufacture, within established timeframes, the highest quality products available that meet customer-specific requirements, using cost-effective, productive and safe processes that conform to regulations, while providing its personnel with opportunities for self-achievement, satisfaction and personal development.”9

DCM was founded in 1987 by a former employee of Canadair, initially manufacturing aircraft ground-maintenance support tools and equipment for Bombardier. It was bought in 2006 by two former key employees of Aero Machining Company (which became part of Mecachrome in 2002). Since 2006, the company has tripled in size, expanding its client base as well as product and service offerings.

The company now manufactures and sells ground-maintenance support tools and equipment to Bombardier Aerospace and other original equipment manufacturers (OEMs), as well as to many airlines and aircraft maintenance centres worldwide. It provides many of these products under licence from several aircraft manufacturers, but it has also designed many of the products that it sells. DCM provides compliance and certification services for these manufactured goods and others at its own inspection and testing facilities. With a reputation for excellent quality performance, DCM has since 2006 modified its manufacturing management practices to substantially improve its on-time delivery performance.

While continuing to provide its original offerings, DCM has become a strategic supplier to Bombardier of parts and assemblies for new aircraft programs. Furthermore, the company now wins contracts for the design and manufacturing of assemblies in which it takes the role of integrator. It outsources some processes, procuring the required components and taking responsibility for the assembled product for its customers. In this way the company has diversified its market, serving manufacturers with new aircraft programs as well as airlines and maintenance facilities that want to maintain existing aircraft. These two markets tend to be counter-cyclical to each other.

DCM has become a strategic supplier to Bombardier of parts and assemblies for new aircraft programs, and it also wins contracts to design and manufacture assemblies in which it takes the role of integrator.

DCM participates in Montréal’s aerospace cluster through linking with other SMEs that can provide complementary production capabilities and services. A participant in this cluster for over 30 years, it has built up a network of contacts with OEMs and SMEs that allows it to participate in new opportunities for contracts and partnerships.

DCM has leveraged its contacts at Quebec-based aerospace MNCs to further expand its product and service offerings. Building on its industry experience and knowledge, it has successfully expanded its client base internationally. By improving its management practices and methods and by investing in inspection, quality control, and testing facilities, it has established itself as a manufacturer in the modular value chain position. (See tables 1 and 2.) As MNCs in its market consolidate their supply chains, preferring to deal directly with fewer suppliers, DCM has become a key supplier to its OEM clients by taking a larger role as a provider of certified assemblies and parts.

Elimetal Inc.

With 25 years of experience, Elimetal Inc. is not only one of the largest, privately held EDM (Electro Discharge Machining) houses in North America, but also a complete precision machining facility utilizing the latest in advanced Computer Numeric Control (CNC) milling and turning technologies. It supplies quality parts for the aerospace, telecommunication, plastics, automotive, industrial and commercial industries.10

The company is accredited for its quality management system under AS9100 REV B and ISO 9001:2000.

Elimetal aims to provide:

The company has strong relationships with its clients based on many years of high-quality and reliable performance. Approximately 70 per cent of its sales come from the manufacture of build-to-print components for aerospace MNCs in the Greater Montréal area and abroad. Elimetal also provides value-added services for its clients such as certified testing and quality control. Because it is a designated quality-control representative for some of its clients, the parts it delivers to them can go directly into aircraft assembly processes. In addition, Elimetal collaborates with its clients’ design engineers to better integrate its manufacturing processes into the design of the components it provides, enabling manufacturing cost reductions. The company has a “kanban” relationship with some of its customers, providing kits of manufactured and purchased components within 24 to 48 hours of request. Each of these services requires sophisticated capabilities in which the company continues to invest because the “bar is being raised constantly.”12

The company confirms that proximity is still a big factor in the choice of suppliers for aerospace OEMs, citing the importance of strong communication and collaborative links in the value chain. This indicates that the value chain position of specialized suppliers such as Elimetal is relational rather than modular because the transactions for which it contracts cannot be fully codified.

The company’s relationships with MNCs in the aerospace industry provide steady volume, long-term business and stability. However, maintaining these relationships requires Elimetal to provide high-quality and reliable performance based on continual improvement. Its relationships with other companies in the production network in Quebec are facilitated by organizations such as the Quebec Aerospace Association, which exists to “promote business development and sustainability in the global market for its SME members.”13

The company points out that there is a shortage of good machine operators, machine programmers, and quality control/inspection personnel in the region. Local schools have to keep producing good candidates, although the arrival of new immigrants with the required skills has helped to mitigate the shortages. The poor transportation infrastructure to the region from other parts of the Greater Montréal area is cited as a further impediment to recruiting and retaining highly qualified personnel.

Elimetal has become a strategic supplier to many MNCs in the aerospace industry in Quebec and around the world thanks to its reliable and high-quality performance. By investing in specialized and innovative manufacturing technologies, and by ensuring sound management of production schedules and quality, it has built strong relationships with its clients and a reputation in the industry. The company further distinguishes itself through its role in certifying quality, product development, and supply chain management for its clients. It distinguishes itself from low-cost suppliers in developing countries by leveraging its relational value chain position (Table 2), thereby underscoring the importance of its proximity to local MNCs.

Marquez Transtech Ltd.

Founded in 1981, Marquez Transtech specializes in thermoforming extruded and reinforced plastics and in manufacturing assemblies and components out of composites. About two-thirds of its customers are in the aerospace sector, with the balance being primarily bus manufacturers.

Originally manufacturing fibreglass components for recreational equipment and buses, the company has since 2005 developed an offering for the aerospace sector based chiefly on composite-based systems and components. It has developed unique expertise in this relatively new technology, which enables it to make low-pressure air distribution systems, interior furnishings, and window assemblies for aircraft.

Rather than defining itself as a build-to-print supplier (manufacturing according to someone else’s design), Marquez has strategically positioned itself as a designer of these systems, developing products for its customers based on stringent requirements. Marquez designs to customer requirements in areas such as weight, geometry, stress, esthetics, flammability, and noise. As part of this process, the company must also prove its products comply with the specifications set out throughout the life of an aircraft program. Through ongoing research and development programs, the engineers at Marquez have, for example, developed innovative, lightweight low-pressure air distribution ducts for commercial and business jets.

This product development role places the company in a modular position in the supply chain of large multinational OEMs. (See tables 1 and 2.) A company brochure states:

Engineer to Engineer: Our Trademark ... We work as partners with your product development team. Whether working to specs or in charge of design; whatever the performance criteria, weight, rigidity, total costs ... we will enhance the product value, performance and development time.14

With this philosophy and through developing its own technological competencies in computer-aided design and production, Marquez has more than doubled its sales since 2005, gaining new clients in the aerospace sector and building an array of products attesting to its ability to solve problems for its clients. It has used this capability to expand to international markets with its product offerings.

Marquez finds new markets both in Canada and abroad because of its reputation and industry contacts.

By mastering the technology behind its products, Marquez has assumed a role in the product development process that was performed by its OEM clients. It has also assumed a role in logistics and integration by providing complete subsystems, including purchased components, with its manufactured products. Marquez has accomplished this by hiring highly qualified engineers and obtaining modern equipment. It has built relationships that are based on strong communication links between its engineers and those of its OEM clients.

The company finds new markets within the aerospace industry in Canada and abroad because of its reputation and industry contacts. Although Marquez tries to manufacture all of its products in-house, it finds that some OEMs want suppliers to take on larger packages that require them to act more as integrators of smaller suppliers’ components. Acting as a systems integrator requires a large commitment in terms of financial and management resources, and Marquez currently prefers not to become an integrator for air distribution systems although it may try to do this for interiors. The alternative for a company able to design and manufacture its own specialized products is to take a role as a second- or lower-tier supplier—that is, become a supplier to another supplier of the OEM.

Eric Faucher, President of Marquez Transtech, represents Quebec SMEs at Aéro Montréal and participates in the organization’s MACH project. The company tries to take advantage of knowledge centres by collaborating with local universities and research centres to help it master technological challenges. “We work with a lot of different universities, institutions like CNRC [National Research Council Canada] .... We are trying to take advantage of what we have locally, which is a lot of expertise, ... which is how we as a small company can take on quite a challenging project,”15 says Faucher.

Marquez Transtech connects with its customers by providing high-quality, innovative products that it designs based on clients’ requirements. Its knowledge and capabilities are unique, specialized, and have high value-added, giving the company a strong competitive position. Leveraging this capability, the company has built a reputation in the industry that allows it to expand its market and to continue to grow.

Key Findings From Aerospace Sector Interviews

What Aerospace MNCs Look for in SME Suppliers

Bombardier and other MNCs in the aerospace industry are looking for strong suppliers that can reliably provide a quality product at all times. MNCs are choosing to work with a small number of key suppliers, and they are strategically selecting the best they can find. To be a strong supplier nowadays, it is important to be as close to a one-stop shop as possible.

Suppliers to MNCs need to produce quality products consistently. In order to do this and compete with other top suppliers, they need to specialize in each process required for the production of their products and parts. If a supplier does not have the right combination or level of expertise in-house, it is expected to convene other suppliers and hire specialists who are experts in each area (e.g., engineers, programmers, designers, and consultants). Suppliers may also be asked to provide the necessary services to maintain their product offering.

Suppliers also need to be able to adapt to change quickly. Product specifications change often within the aerospace industry, and this has implications for production factors such as the manufacturing process and the materials used. Suppliers must be able to solve problems creatively and find effective solutions fast.

If an SME specializes in a highly desirable area, or can provide a unique product or service, MNCs may be willing to overlook a slightly higher price.

Price also matters. MNCs are increasingly looking toward international suppliers to gain cost advantages, and suppliers must be able to provide lower prices than competitors at home and abroad. Suppliers need to keep in mind the total life-cycle costs of their product offering.

However, a unique offering can be more important than price. If an SME supplier specializes in a certain area that is highly desirable, or can provide a unique product or service, MNCs may be willing to overlook a slightly higher price.

For instance, Marquez Transtech has considerable expertise in designing its products, and it owns its product designs. It follows a design-to-print model with Bombardier, which means it is responsible for meeting all required specifications at all times. With this model, the supplier takes on a portion of the risk, and Bombardier rewards the company with a contract for the lifetime of the program or product line. Marquez has developed a long-term relationship with Bombardier and is committed to maintaining production over the lifetime of any program or product line. In exchange for service and reliability, Marquez feels it is in its client’s interest to continue to choose Marquez over another supplier.

SME Benefits From Working With MNCs

SME suppliers to Bombardier benefit from:

  • long-term relationships;
  • consistent work and sales levels through new programs; and
  • consistent sales forecasts that help to determine planning and scheduling.

Common Challenges for SMEs

The SME suppliers interviewed for this case study indicated that they did not have any specific challenges working with and supplying Bombardier. However, they noted the following general challenges about working as SME suppliers in the Quebec aerospace industry:

  • difficulty recruiting and retaining experienced skilled workers; and
  • lack of good technical graduates from Quebec-based schools.

Chapter 5 - Information and Communications Technology Sector

Chapter Summary

The ICT sector comprises several segments, some of which are operating with new business models that continue to evolve. For the purposes of this project on production networks, we focus on the segment of this sector that makes or “manufactures” software products of various kinds. Quebec is home to many companies producing computer games, special-effects sequences for the film industry, business applications for corporate offices, and applications for mobile platforms such as smartphones and tablets. Approximately 200 foreign companies have located subsidiary branches in Montréal (e.g., France’s Ubisoft), attracted by the availability of skilled people and relatively low costs. In the Montréal area, the ICT sector consists of more than 2,700 companies employing about 110,000 people.1

As an example of the innovative way in which production networks operate to produce software applications (apps) for mobile devices, consider how the manufacturers of these devices (e.g., Apple, Research In Motion, Google) outsource this work. Rather than following a traditional approach of detailing specifications and soliciting bids, these companies announce that they are providing an application programming interface at minimal cost to potential developers wishing to purchase one. Entrepreneurial developers find out about these opportunities through Internet announcements and social networking sites. These developers buy the development kits and work either independently or in groups to create innovative new software, which they can upload to the manufacturer. After verifying that the new application contains no malicious content and evaluating its function, the manufacturer makes the application available on various mobile platforms—such as the iPhone, iPad, BlackBerry, and BlackBerry PlayBook—and manages the transactions with the users who wish to purchase the application. The developer and manufacturer share the revenues. Developers require minimal investments of capital to participate in these opportunities, and there is little advantage in creating a separate organization in order to carry on a business. All that is required is creativity, programming knowledge, and the efforts of the developer. If an application is a hit with users, the revenue can be very high since these mobile platforms are used by millions of people.

Within Montréal’s ICT cluster, a grassroots type of production network is rapidly evolving alongside the more traditional type found in other sectors.

This method of outsourcing software development enables the rapid availability of many applications on mobile devices. It also leads to the creation of an “ecosystem” of platforms, developers, applications, and users that mimics natural selection to make the most useful, best-performing applications available to users in a very short period of time. Platform manufacturers do not have to invest in developing applications, and developers do not have to invest in the platforms, distribution channels, or infrastructure needed to process transactions with the millions of potential purchasers of the software. The availability of many applications makes the mobile device more useful and thus promotes its sale. Consumers benefit from the large number of innovative applications that they can obtain at a low cost.

Developers do not need to be physically close to the manufacturers of these platforms because—unlike companies that make material-based goods—they do all of their work via the Internet. There are networks of developers in Montréal that interact with each other and with developers in other geographic regions through Internet-based communication services such as Skype and social networking services such as Twitter. These services facilitate collaboration, networking, and the communication of information about new software development opportunities, new business ventures, and new contracts. For example, through following someone on Twitter, software developers in Montréal recently became aware of an event hosted by a small company interested in developing an application for a new “cloud” platform hosted by Amazon. Part of the event consisted of a workshop to show interested developers how to develop applications on this new platform. The other part was devoted to discussion and work to come up with ideas for the new requirement.

Within Montréal’s ICT cluster, a grassroots type of production network is rapidly evolving alongside the more traditional production network typical of those found in other sectors. The SMEs in this sector often have little fixed infrastructure, communicating via the Internet with clients and collaborators that are often located in other parts of the world. They form informal networks to exchange information without necessarily physically meeting one another or their clients. This form of production network is also becoming more prevalent with the advent of cloud platforms for applications that are hosted at remote sites and are accessed through computer systems in fixed locations. There are few local MNCs in this segment, but this does not hamper the operation of this production network because SMEs can easily communicate with their MNC clients via the Internet. Meeting locally is important, however, because participants in this network need to collaborate on technical and business matters. It is clear that the communication and trust relationships brought about by face-to-face contact cannot be adequately obtained otherwise.

The value chain in this segment of the ICT sector is governed almost purely by market forces. The price and quality of the developed applications determine their success or failure. The network is truly global in extent, and the barriers to entry are low in terms of years of experience, capital, and brand name. Companies are small, and outsourcing of software development tends to be based on splitting up projects that are too large for one software developer to handle alone or require the specialized skills of several software developers.

Montréal has a large cluster in this segment of the ICT sector, and this is thought to be because of the large concentration of universities and university students in the city, as well as the relatively inexpensive urban lifestyle. The artistic creativity found in Montréal adds to this cluster’s attractiveness, contributing to the quality and originality of the graphic design associated with many of the applications being developed. As well, there are many alumni of the now defunct Nortel and other high-tech firms that closed their doors. These talented and knowledgeable people—perhaps wary of working for large organizations again—act as catalysts and initiators for many of the start-ups.2 The presence of several MNCs in Quebec (e.g., Bell, Ubisoft, and CGI) has provided a training ground for people educated in the universities and technical schools. Some of these people have subsequently gone on to create spin-off SMEs providing products and services to the MNCs and other clients.

Key Findings From ICT Sector Interviews

The ICT sector illustrates how the Internet and other media are being used to facilitate the development and functioning of production networks. The rapid evolution of the technologies in this sector necessitates the equally rapid communication of information to participants about customer needs, sources of finance, technical knowledge, and best practices. The Internet is used as a tool to convey announcements and some information; nevertheless, face-to-face meetings are also ubiquitous. The ICT sector feeds upon and contributes to the culture of creativity and innovation that exists in Montréal. Whereas the city’s aerospace sector is driven by a few local MNCs, the ICT sector is much larger and is driven by global MNCs that are mostly outside Montréal.

The networks in Quebec’s ICT sector are driven by the large pool of knowledge in software development and computer engineering present in Montréal. The rapid rate of change in this field, together with the relatively small amount of infrastructure required to develop products, makes working in the software development segment of ICT an attractive opportunity for talented and creative people. Those who are willing to look for contracts find that new start-up and freelance opportunities are plentiful. They will also find ample rewards, challenging projects, and opportunities to increase knowledge and experience. These attractions may not be as evident in established firms, where the pace of creativity and knowledge acquisition can be somewhat slower. The security usually associated with employment in a large company is apparently not as highly regarded as it once was among the people in this segment, and many believe that it is better to work independently or in small firms than to tie oneself to one company.

Lateral relations in the production networks of the software development segment operate differently from those in other industrial sectors. For example, entrepreneurs often initiate events to bring together potential users of new software applications and software developers. These events, frequently promoted through social networking sites, provide an opportunity for developers and entrepreneurs to learn about the needs of potential customers in segments of the global economy. Representatives of companies in various sectors (e.g., law, hospitality, and airlines) attend these events, where they present wish lists of potential information technology applications in their industries. These wish lists can trigger ideas among software developers for technological solutions. While these forums expose potential suppliers to the needs of a market segment, other events bring potential providers of capital into contact with developers and entrepreneurs. These are venues where participants can convey information on best practices for technology start-ups or share information and experience regarding programming languages and specific platforms. The number and frequency of both types of events in Montréal is increasing, with people becoming aware of them through websites such as www.startupdigest.com, where sector participants around the world can enter information about forthcoming events as well as find out about planned events in their region.

Chapter 6 - Fashion and Clothing Sector

Chapter Summary

Production networks in the fashion and clothing sector have weakened over time. The leading companies in the sector and their suppliers are no longer as closely or strongly engaged in business together through these networks.

Part of the explanation for this change lies in the impact of globalization and the opening of Canada’s markets through free trade. Like many other parts of the economy, the Quebec fashion and clothing sector has undergone a period of disruption stemming from globalization, the abolition of import quotas in 2005, and the rise in value of the Canadian dollar. Once a leading centre of manufacturing in Canada, the industry has seen its revenues shift from a mix of 55 per cent manufacturing and 45 per cent wholesaling (offshore producers) in 2004 to 33 per cent manufacturing and 67 per cent wholesaling in 2008. (See Chart 1.) This shift is manifest in the industry’s increasing focus on services such as design, branding, merchandising, marketing, and logistics.

Now companies in Quebec—whether manufacturers, importers, or both—purchase their components and accessories from suppliers around the world.

Perhaps the greatest change relates to the sourcing of components and accessories. Previously the Quebec-based production networks in this sector used components and accessories that were manufactured locally. Manufactured apparel products were then sold to wholesalers and retailers in the Canadian and U.S. markets. Now companies purchase their components and accessories from suppliers around the world. This is true whether they are manufacturers, importers, or engaged in both types of activity.

Chart 1
Transformation of Canada’s Clothing Industry
(percentage of revenues)

Chart 1 show the evolution of the Canadian’s clothing industry between 2004 and 2008.  In 2004, the clothing manufacturing grossed 55% of the total industry compared to the 45% for the clothing wholesaling.  Between 2005 and 2006, the two sectors had equal part of revenue.  In 2007, the clothing wholesaling sector took the lead with 60% of the total revenue.  In 2008, the gap increased with the clothing wholesaling sector revenue reaching 75% and the clothing manufacturing came down to a low 25% of the total industry revenue.

Source: Milstein and Co., Presentation.

Quebec manufacturers seek to sell their products overseas, and are gradually adapting and finding ways to improve their value proposition to compete globally. This is being done through direct sales on the Internet, through Canadian retailers that have successfully established stores in other countries (e.g., Aldo Group and La Vie en Rose), and through other retailers.

S. Cohen Inc. has forged new relationships with customers and offers them new, innovative services.

Currently, there is also a significant initiative to grow product development in Montréal through new or renewed networks. The focus of the networks has moved from buying and producing mass quantities locally to more innovative production and marketing models. Today, companies are increasingly using the new networks to expand and brand Quebec-based fashion design, promote local fashion designers, and develop new talent. One of the catalysts for the development of new creative talent is the presence of the Cirque du Soleil atelier in Montréal. This organization is a leader in attracting and developing talented individuals who design original apparel.1

Value-added services that Quebec SMEs are striving to incorporate into their businesses include:

Marie Saint Pierre Design is a Montréal-based firm that designs original, high-quality women’s wear and manufactures, markets, and sells its products in Canada and the United States. Founded 20 years ago, the company owns and operates its own retail stores and also sells its products through other specialty and department stores. The company designs and produces a new line of women’s apparel each season, which it promotes through fashion shows and the media. The company outsources 70 per cent of its manufacturing operations to other companies located in Quebec.2

S. Cohen Inc. is a long-established “Canadian manufacturer of men’s fine tailored suits, jackets, coats and trousers” that emphasizes product innovation, style, and value. It recently built a state-of-the-art facility in Boisbriand, Quebec, that uses fabrics sourced globally to produce products. During the last two decades, S. Cohen “has experienced a period of rapid expansion, entering new markets and redefining expectations of what tailored clothing can offer.” Today its products are available at over 1,000 retail locations worldwide. A pioneer in high-performance clothing, it offers products that “have exclusive features such as Stretch Guard panels and Performa-Stretch waistbands to provide exceptional comfort.” The company opened its new factory in 2003, where skilled workers operate advanced technology.3

In order to succeed in the face of global competition, the company began importing part of its offerings from Asia about eight years ago while maintaining its manufacturing output in Quebec. It has also forged new relationships with customers, offering them new, innovative services. For example, the company can provide rapid delivery of models and sizes that may not all be stocked by its retail clients. As well, custom orders and made-to-measure suits can be quickly delivered to retail outlets in North America. In this way the company capitalizes on its fast production and proximity to its customers, employing an expanded customer service department. The company is also beginning to sell its products on other continents, making use of new technologies to extend its sales globally. The company’s supply chain of fabrics and components is mainly based overseas. There are no longer any significant manufacturers in Quebec or Canada of any raw or finished items that are incorporated into S. Cohen’s products. These manufacturers, once part of a thriving clothing industry cluster in Quebec, have completely disappeared in recent years.4

Key Findings From Fashion and Clothing Sector Interviews

Marie Saint Pierre Design and S. Cohen Inc. show how some Quebec SMEs are meeting the challenge of global competition. New product development, innovative new services, mechanization of manufacturing processes, operational excellence, and branding and marketing of high-quality made-in-Quebec products are among the strategies employed by these companies to gain market share in the global market.

The fashion and clothing sector production network that existed in Quebec when much more manufacturing was done in the region has largely disappeared. It is being replaced by a different network of companies that design, market, manufacture, import, distribute, and sell products locally and internationally. This new network, now based to a great extent on services, requires people with different skills and training. The Montréal region’s knowledge base in fashion design, marketing, manufacturing, and retailing still exists, with many skilled former employees and owners of companies in the cluster searching for new opportunities. Some manufacturers are able to maintain their ties to customers in the retail world and continue to provide garments to retailers; however, they now do this through new ties forged in Asia, where the goods are produced. These former manufacturers act as links between retailers and the supply chain, leveraging their know-how in manufacturing to add value by ensuring that the manufacturers that they use in Asia produce goods suitable for the clientele they serve. Others are assuming new roles in the value chain, designing and branding new lines of apparel. As a result, the high-value-added segments of the apparel value chain—design, branding, and rapid service—can remain based in Montréal, even as the more labour-intensive factory jobs are predominantly in low-cost countries.

SMEs in the fashion and clothing sector are being aided in this transformation by government initiatives at the federal, provincial, and municipal levels to facilitate networking and intra-sector communication; promote Quebec and Montréal as a centre of fashion creativity and excellence; assist financially via incentives, loans, and tax credits; and encourage closer ties between this industry and the regional educational institutions that provide training in design, management, and marketing. Such efforts are an example of what can be done to help SMEs compete successfully in global markets despite challenges from low-cost countries. The approach could be applied to other sectors of the Quebec economy, as we discuss in the following chapter.

Chapter 7 - Consumer Applicance and Industrial Equipment Sectors

Chapter Summary

The Quebec economy, once populated by a multitude of manufacturing companies, has changed dramatically as competition from low-cost countries has risen. There has been a steady decline in the number of companies manufacturing consumer appliances and industrial equipment and in the number of SMEs that support them.

In this chapter we examine the consumer appliance and industrial equipment sectors to determine why there has been a lack of progress in meeting the new competitive reality. And we explore whether the successful approaches described earlier in this report could be applied to other sectors of the Quebec economy.

MABE Canada Inc.

MABE Canada is a division of MABE (a Mexican company) in partnership with General Electric Corporation. Known formerly as Camco Inc., MABE Canada is the “largest Canadian manufacturer, marketer and service provider of home appliances.” Its manufacturing operations are based in Montréal. The company’s product line includes brands such as GE, Hotpoint, Moffat, Monogram, BeefEater, and Samsung. MABE Canada also “produces and services private brands for major Canadian department stores.” It employs over 2,000 people and exports its products to more than 30 countries.1

The company manufactures the bulk of its appliances at its plant in Montréal, but only a small proportion of its supply chain is in the local market—a far cry from the situation in the 1980s and1990s, when many of its suppliers were in Quebec. According to a company representative, MABE’s former suppliers in the region have not been proactive in improving their processes and their own suppliers.2 He adds:

They should challenge themselves by doing some lean improvements, for instance . . . asking us what we’re thinking they should improve . . . be active every year, maybe do a brainstorm. Too often they wait five, six, seven years, and then we’re asking them to reduce their price and they cannot do it. After five years they are saying to us that they want to increase the price.

MABE Canada sees some opportunities for local suppliers to assemble components into larger sub-assemblies.3

Velan Inc.

Velan “manufactures a world-leading range of cast and forged steel gate, globe, check, ball, triple-offset butterfly, knife gate, highly engineered severe service valves, and steam traps offering superior performance across all major industrial applications.” Founded in 1950, it has annual sales of over $400 million, more than 1,600 employees, and 13 production facilities on three continents. Its largest footprint is in Montréal and Granby, Quebec, where it has over 600,000 square feet (55,742 square metres) of manufacturing facilities in six plants. It serves a wide range of industries, including power generation (fossil, nuclear, and cogeneration); oil and gas; refining and petrochemicals; chemicals and pharmaceuticals; liquid natural gas and cryogenics; marine; heating, ventilation, and air conditioning; mining; water and waste water; and pulp and paper.4

Velan outsources the manufacture of some of its parts and assemblies, as well as some non-core manufacturing processes, to Quebec companies. In some cases, for non-core technologies, suppliers performing processes such as heat treating, chemical treating, and coating may collaborate in the process specification. A few local companies have expertise in these technologies.

The company generally seeks stable relationships with partners or suppliers that it can work with over the long term. However, being in a competitive market, price is an important consideration. The company will pay a reasonable premium if there is a demonstrated gain in quality or service level, such as where a supplier has a good understanding of the underlying technology and can solve a problem when it comes up. Proximity of suppliers is desirable because lead times are important.

The case studies in this chapter indicate that there are Quebec production networks that are not well developed, despite the presence of world-class MNCs.

The majority of Velan’s suppliers are outside Canada. Consequently, Velan’s supply chain is long, which affects its own lead time significantly. Although Quebec possesses some very competent suppliers, there are clusters in other parts of the world better suited to Velan’s supply needs. The company finds that the manufacturing sector in Quebec is not geared to its processes and products, being more heavily skewed toward the aerospace industry than toward fluid-handling equipment. In Velan’s product area, Quebec does not come close to matching some other regions—such as the U.S. Gulf Coast, northern Italy, and some areas of China—in the concentration of competent capabilities and established manufacturing base dealing with raw materials, machining, castings, forgings, and coatings.5

Key Findings From Sector Interviews

These case studies of MABE Canada and Velan indicate that there are production networks that are not well developed in the Quebec economy despite the presence of world-class MNCs. There are, however, significant opportunities for companies in the region to develop themselves into competitive suppliers for these MNCs and to play a larger role in their supply chains. With improvements to processes and equipment, local SMEs may be able to compete with global suppliers and take advantage of their proximity to local MNCs in these sectors.

It may be possible, with government and industry leadership, to strengthen the sectors’ production networks.

However, the two case studies reveal limitations of the MNC-SME MABE Canada case demonstrates how important it is for suppliers to recognize and respond aggressively to global competition and seize sales opportunities. MABE Canada’s suppliers did not see how competition would affect their ability to maintain MABE as a customer. Their lack of awareness and resulting complacency led MABE to seek better-priced suppliers in other countries.

With government and industry leadership similar to that shown in the aerospace and other sectors, it may be possible to strengthen the production networks in the consumer appliance and industrial equipment sectors. Suggestions for action include:

Chapter 8 - Conclusions and Recommendations

Chapter Summary

The globalization of trade and the strengthening of the Canadian dollar have put considerable pressure on Quebec SMEs to change the way they do business. The Quebec region has been gradually transforming from one built on less-than-world-class capabilities toward one that can compete globally. The weak Canadian dollar during the 1980s and 1990s allowed companies to compete despite the lack of world-class performance; a dollar at parity with the U.S. dollar requires significant performance enhancement in order for Quebec firms to survive and prosper.

Although the sectors studied in this report differ in how the companies within them operate and interact, as well as in the industry requirements and challenges they face, we have seen that production networks can grow and thrive with the following key ingredients:

For SMEs, MNCs can initially act as a source of orders for items that can be easily codified, such as components in aerospace or software applications in ICT. These orders can provide steady streams of business for SMEs as they grow their capabilities to provide higher quality and reliability as well as more value-added services—and eventually gain the capability to develop their own products. The presence of MNCs is an important factor in the development of knowledge and experience in various industry sectors, often leading to the founding and success of spinoffs.

Links for communication between MNCs and SMEs and between SMEs and customers are a critical factor in providing information to companies about clients’ needs in terms of products, services, and performance. Forums where entrepreneurs can meet and share information about markets, technologies, and performance are valuable in raising the bar within industry sectors. These forums can help capital-intensive companies that are starting up or investing in improvements to gain access to financial support. Such support is particularly valuable in cases where there is an unusually long time lag between investment of capital and generation of a cash flow from sales. In those situations, traditional methods of financing are often inadequate.

Quebec has the potential to build strong industrial clusters in several areas in the modern world economy based on the high quality of life it offers, the relatively low cost of living in its urban centres, and the presence of world-class universities. However, the availability of skilled workers for SMEs is problematic in many industry sectors. Whether attracted from abroad or homegrown, talented workers in Quebec look elsewhere if there are not suitable opportunities in the province or end up not fully realizing their potential. Governments working with industry can identify needed talent. Educational institutions can create programs where companies guarantee hiring over a long period.

The knowledge, talent, and creativity available are being leveraged to allow the fashion and clothing sector to emerge stronger than before globalization.

In Quebec’s aerospace sector, SMEs have been gradually investing and improving their capabilities in collaboration with MNCs. For example, they have boosted the productivity of their manufacturing operations and expanded their ability to provide the array of services needed by MNCs to make their value chains more effective and efficient. This effort has allowed many SMEs to become strategic suppliers of complex assemblies, often participating in product development. In many cases, this has enabled these companies to become suppliers to other MNCs in the industry, providing diversification of their customer base. Additionally, it has allowed them to maintain and strengthen their relationships with MNCs while these MNCs are consolidating their supply chains. Many of the SMEs that have achieved this level of partnership have benefited from other networking efforts—such as improving ties to universities and research institutes in Quebec that have provided a source of skilled graduates and knowledge—as well as from participating in local trade associations, organizations, and institutions.

In the fashion and clothing sector, although the governance of the value chain and the way it operates are different from that in the aerospace sector, the response to global competition has been similar. SMEs have increased their focus on providing services and on high-value manufacturing. The knowledge, talent, and creativity available in Montréal are being leveraged through brand promotion to allow this sector to emerge stronger than it was before the disruption caused by globalization—and with a shift to the higher-value areas of the value chain.

The ICT sector is benefiting from the worldwide demand for information and communications technologies and from the presence in Montréal of a concentration of skilled ICT workers. The participants in this sector are proactively seeking out information about customer requirements, sources of funding, and technical advancements through a myriad of networking tools and events on a worldwide basis.

Some SME parts suppliers are able to offer more value by integrating components that they source with their own manufactured parts, to provide assemblies.

In other traditional manufacturing sectors, the globalization of supply chains has made it difficult for SMEs to compete in the manufacture of non-complex components unless they have improved their productivity or their manufacturing technologies. However, by mastering new manufacturing technologies and product development skills, and by establishing better collaboration between in-house engineers and designers and those of their clients, some SMEs have been able to shift their place in the value chain to one where they provide unique value to their clients, thereby strengthening their competitive positions. Other SMEs that provide parts are able to offer more value by integrating components that they source with their own manufactured parts to provide assemblies to their customers. SMEs in these sectors would benefit from more information about other services they could offer to clients, as well as about processes that are being outsourced to companies outside the region that could be performed locally.

Recommendations

Best Practices for SMEs

  1. SMEs in traditional manufacturing sectors should obtain more information about the needs of potential clients by participating in trade associations and sector-specific network events that include these clients.
  2. SMEs should communicate with other companies in the region about common issues in order to improve the performance of the sector as a whole. Joining trade associations or forming new trade associations where none exist is an effective means of gaining knowledge about markets, performance standards, technical issues, and common challenges.
  3. SMEs should position themselves in the value chain at the point where they can be most competitive, leveraging their knowledge, capabilities, proximity to customers, and workforce to provide value-added services and high-value manufacturing. One way to accomplish this would be to focus on identifying opportunities for growth within the supply chains of MNCs based in Montréal or operating major components of their supply chain procurement in Montréal. This would provide a practical commercial basis for decisions about modifying product and service offerings.
  4. SMEs should aim to provide world-class levels of service and products by upgrading their capabilities and productivity. They can do this by hiring highly trained people from universities and technical schools, consulting with experts, and investing in process improvement.
  5. SMEs should travel to inform themselves about the level of products and services their customers are obtaining from global competitors.
  6. SMEs should learn about the opportunities governments provide to meet companies in their sector as well as foreign companies coming to Canada, and they should participate in trade missions to other countries.
  7. SMEs should strengthen ties with institutions such as technical schools, universities, and research centres to take advantage of the knowledge available.

Best Practices for Governments

  1. Governments at different levels should work together to improve the links between local MNCs and potential SME suppliers in the region. This can be done by promoting the creation of sector-based non-profit industry organizations that support industry sector production networks by facilitating networking and intra-sector communication among MNCs and SMEs. These organizations could provide programs and initiatives, and organize networking events to promote collaboration that would help improve the competitiveness and growth of an industry sector. A successful organization that could be used as a model is Aéro Montréal from the aerospace sector.
  2. Governments could consider creating non-profit industry organizations based on membership in global supply chains for Montral-based MNCs. The key here would be to identify areas of product and service supply that could be provided by Montréal-based SMEs if they were made aware of the opportunity and were able to find SME partners to collaborate with in enhancing their offering to the MNC.
  3. Governments should coordinate education and immigration programs to increase the supply of appropriately skilled talent to SMEs. This would enable SMEs to grow their pool of employees with advanced skills and thereby increase organizational capacity. In addition, adding skilled and knowledgeable immigrants would enable SMEs to better recognize and take advantage of business opportunities, domestically and internationally.
  4. Governments should consider a variety of programs and initiatives that would promote Quebec as a centre of quality manufacturing, innovation, and excellence. For example, programs and initiatives could be set up to:
    • assist financially via incentives, loans, and tax credits;
    • encourage closer ties between targeted sectors and the regional educational institutions that provide training in manufacturing, management, and marketing; and
    • promote industry networking events that would enable potential SME suppliers to connect with MNCs in the region to better understand their requirements and the opportunities they represent.

Appendix A - Bibliography

Adams, S.B. “Stanford and Silicon Valley: Lessons on Becoming a High-Tech Region.” California Management Review 48, no. 1 (2005), 30–51.

Aéro Montréal. Cluster Working Groups and Committees, (accessed March 11, 2011).

Mission, Role and Objectives, (accessed March 11, 2011).

Berger, S. How We Compete: What Companies Around the World Are Doing to Make It in Today’s Global Economy. New York: Doubleday, 2005.

Bombardier Inc. Worldwide Presence(accessed December 26, 2011).

Mission Statement(accessed December 26, 2011).

Brusco, S. “The Emilian Model: Productive Decentralisation and Social Integration.” Cambridge Journal of Economics 6 (1982), 167–84.

Carey, D. “Popular iPod Gets a Makeover.” EE Times (January 5, 2004).

Centre-du-Québec. ACCORD Niches of Excellence: A Welcome Opportunity, (accessed December 26, 2011).

Cirque du Soleil. Presentation at the Fashion and Clothing Industry Strategic Forum. Held at Montréal, June 16, 2011.

CNW Canada Newswire. Aéro Montréal Launches MACH Initiative. July 20, 2010, (accessed December 26, 2011).

DCM Aerospace. Company, (accessed December 26, 2011).

Dicken, P. “Tangled Webs: Transnational Production Networks and Regional Integration.” Spaces. Marburg, Germany: Philipps-University of Marburg, 2005.

Elimetal Inc. Corporate Profile, (accessed December 26, 2011).

Mission Statement, (accessed December 26, 2011).

Gereffi, G. “The Organization of Buyer-Driven Global Commodity Chains: How US Retailers Shape Overseas Production Networks.” In Commodity Chains and Global Capitalism, edited by G. Gereffi and M. Korzeniewicz, 95–122. Westport, CT: Praeger, 1994.

Gereffi, G., J. Humphrey, and T. Sturgeon. “The Governance of Global Value Chains.” Review of International Political Economy 12, no. 1 (2005), 78–104.

Industry Canada. MABE Canada Inc.(accessed January 9, 2012).

Kogut, B. “Designing Global Strategies: Comparative and Competitive Value-Added Chains.” Sloan Management Review 26, no. 4 (1985), 15–28.

Krywulak, T., and V. Kukushkin. Small Companies, Big Connections: The Benefits and Challenges for SMEs in Working With MNCs. Ottawa: The Conference Board of Canada, 2009.

Lambert, D.M., and M.C. Cooper. “Issues in Supply Chain Management.” Industrial Marketing Management 29, no. 1 (2000), 65–83.

Laval Technopole. Laval Technopole, (accessed December 26, 2011).

Lazzarini, S.G., F.R. Chaddad, and M.L. Cook. “Integrating Supply Chain and Network Analyses: The Study of Netchains.” Journal on Chain and Network Science 1, no. 1 (2001), 7–22.

Marquez Transtech Ltd. Marquez Aerospace: Low Pressure Air Distribution System.

Milstein and Co. Presentation at the Fashion and Clothing Industry Strategic Forum. Held at Montréal, June 16, 2011.

Muller, A.R. The Rise of Regionalism: Core Company Strategies Under the Second Wave of Integration. Doctoral thesis. Rotterdam School of Management/Rotterdam School of Economics. Rotterdam: Erasmus University Rotterdam, 2004.

Nadvi, K., and G. Halder. “Local Clusters in Global Value Chains: Exploring Dynamic Linkages Between Germany and Pakistan.” Entrepreneurship and Regional Development 17, no. 5 (2005), 339–63.

Porter, M.E. “Location, Competition, and Economic Development: Local Clusters in a Global Economy.” Economic Development Quarterly 14, no. 1 (2000), 15–34.

Quebec Aerospace Association. AQA Presentation, (accessed December 26, 2011).

S. Cohen Inc. S. Cohen, (accessed December 26, 2011).

Saint Pierre, Marie. Presentation at the Fashion and Clothing Industry Strategic Forum. Held at Montréal, June 16, 2011.

Stopford, J.M., and S. Strange. Rival States, Rival Firms: Competition for World Market Share. Cambridge: Cambridge University Press, 1991.

TechnoMontréal. TechnoMontréal, (accessed December 26, 2011).

Velan Inc. Global Operations(accessed December 26, 2011).

Date modified: