Defense cuts are looming once again as the US government seeks to balance its budget. The fairly predictable reaction from politicians is to protest the cuts, which will hurt individual states during an election year. What the general public might not know -- but the supply chain does -- is that cuts will harm a segment of the electronics industry known as minority-owned/disadvantaged businesses.
Sourcing agreements require a certain portion of the government's spending to be directed toward these businesses, which include those owned by women, ethnic minorities, and veterans. I've come across a number of companies that qualify in the electronics distribution/manufacturer's rep space. In distribution, it is fairly easy to set up a business if you can invest capital in inventory. Over the years, I've covered one- or two-person businesses operating out of homes, garages, and basements. Many of them are reputable businesses that take supplying the US government seriously.
An organization called the Coalition for the Common Defense compiled some state-by-state estimates for losses if the budget cuts go through. In New York alone (PDF), 379 businesses owned by women "provided goods and services for America's national defense," and those businesses could lose more than $50 million of revenue.
The term for this particular type of budget cut is sequestration, which basically means cuts will happen across the board. In September, Secretary of Defense Leon Panetta compared mandatory defense cuts to “shooting ourselves in the head.”
The coalition described the impact on the Empire State this way.
New York defense prime contractors earned over $7.59 billion in 2011 protecting America, but now they may face 18% revenue cuts under Sequestration -- starting in 2013.
New York defense contractor revenue losses could be greater than $1.37 billion -- each year.
I'd like to hear from minority-owned/disadvantaged businesses in the electronics industry. Is this the usual posturing over defense cuts, or is it a very real threat?
Barb, Ideas for small businesses bidding against a bigger competitor in defense? See your congressman/woman or senator!
I don't advocate this as a sane strategy but in the confused world where business mixes with politics who is advocating for you is extremely important.
Defense spending is part of the bigger problem of US government that allocates money for votes, such as a cheerleading museum in Texas and a grant to study the mating habits of scallops (or it is clams?) It's all gotten way out of hand, and I think the government can adjust to a decrease across the baord. As to minority-owned business, I'm not sure they are in other sectors of the government or even the private sector. I think this originally was a good idea that does get taken advantage of. A business should earn a customer's patronage by providing superior products and services. At the same time, bidding against big defense contractors has to be daunting for any small business. Ideas?
I think, at least in part, because the goverment levies requirements on the defense industry (primarily the big defense contractors) to perform a certain amount of business with minority owned companies, providing an advantage for minority owned businesses to play in that industry.
Barbara, Defense spending needs to come down, period. What effects this has on businesses is debatable but over the years and especially since last decade defense spending has ballooned to the point its effect on the economy has become bigger than it should be.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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