Production Subcontracting: A Policy Issue for Small and Medium Scale Manufacturing Industries in Nigeria

Abstract

This study set out to examine production subcontracting as an alternative policy strategy for the development of small and medium scale industries in Nigeria. Using a purposive random sampling, the study selected 50 SMIs from 100 SMIs identified from the industrial directory of the study area. Based on the literature, harnessing economic potentials of SMIs in Nigeria will continue to be a mirage since several policies aimed at SMIs development have not stand the test of time due to poor and erratic implementation. Analysis carried out in this study showed that while 63% of the respondents (SMI operators) were motivated to use production subcontracting process because it reduces their cost of production, 20% of the respondent made use it because of the market it creates for their products. Similarly, there was a general acceptance of the process as reducing cost of operation; improving service quality, enhancing core business capacity and creation of markets were the most commonly accepted benefits of production subcontracting by the respondents. This paper therefore recommended that subcontracting processes be made an industrial policy or infused into the existing SMI policies so as to make them more proactive and pragmatic in the development of SMIs in Nigeria. DOI: 10.5901/ajis.2015.v4n2p375