Stuck in the Middle
Mid-market companies, facing many of the same business challenges as the big guys, are finding that just because they're considered "tier two" doesn't mean that they can't apply top-tier best practices and solutions to rev up their supply and demand chains and gain competitive advantage in a punishing marketplace.
[From Supply & Demand Chain Executive, April/May 2004] Sometimes being a mid-market company can feel, well, like being stuck in the middle, or at least it seems that way sometimes to Thomas Gill.
Gill is director of computer-aided engineering technology and support at Freudenberg-NOK, an auto supplier headquartered in Plymouth, Mich. He says that in the automotive industry, the big tier-one suppliers and original equipment manufacturers (OEMs) that buy Freudenberg-NOK's gaskets, hoses, o-rings, seals and vibration control products are focused on lowering costs while raising quality standards. Meanwhile, the large companies that supply Freudenberg-NOK's raw materials are focused on inching their prices upward. "So," Gill concludes, "we tend to get squeezed in the middle."
Tier-two Revenues, Tier-one Challenges
Definitions of what, exactly, constitutes the mid-market vary, of course. Some analysts suggest that the mid-tier of companies begins somewhere around $50 million in annual revenues and ends just shy of the Fortune 1000, which starts at a little over $1 billion in annual sales. Some include companies in the $10 million to $50 million range, while still others draw the upper line at $500 million, $600 million or $700 million. And then there are divisions of much larger corporations, independent units that might bring in $300 million or $400 million in sales on their own and that might behave, for all intents and purposes, as separate companies, but which technically constitute a box on the org chart of a $20 billion or $30 billion company. Some solutions providers define the mid-market by the number of employees at a company, with different providers' lower and upper limits ranging from 20 to 2,000 or more. Given all this uncertainty, obviously the number of mid-market companies is a moving target, and estimates cover the gamut from about 90,000 in the United States to about 400,000 globally.
Questions of size aside, mid-market companies today operate in the same business environment as the Fortune 500 and face all the same challenges that confront larger organizations. For example, David Caruso, senior vice president and director of research at technology consultancy AMR Research, outlines business forces affecting mid-tier companies in his 2003 report "The World Class Challenge: Six Critical Issues Mid-market Manufacturers Must Address." He points to several trends confronting mid-tier organizations that likely would ring familiar to executives at large enterprises, too: globalization, increasing supply chain complexity, requirements for mass customization and more rapid product innovation, the need to hold the line on costs, and a rising tide of regulatory requirements and customer mandates.
But industry observers also point to several ways in which the mid-market differs significantly from the upper tier of corporations. For instance, Jay Baitler, executive vice president with Staples Contract, a division of office supply giant Staples that caters to both midsize and large organizations, notes that frequently smaller companies do not have the depth of sourcing expertise one might find in a major enterprise. "If you go into a Fortune 1000, you'll find more sourcing specialization," Baitler says. "As you move down-tier into the mid-market, you'll find more generalization among the sourcing folks, so the same person or people responsible for the office supplies relationship will probably be involved in furniture, print and technology."
