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There is growing competition amongst Small & Medium Enterprises in the Asian economy and even more so in India. Recent growth of the Indian manufacturing sector can be attributed to the initiatives taken by some large manufacturing companies over the last five to six years. Growth of our economy however, may not follow the same trend, as the Indian economy has a diverse base across sectors with large, medium and small industry in all sectors. The model for growth in India would have its’ own character. Manufacturing sector would have to grow across sectors and across the geographical length and breadth. Agriculture and services sector cannot lead the growth of the Indian economy at this stage. Healthy growth in the manufacturing sector is what will create the required jobs and the financial muscle to invest into infrastructure and technology for the future. The economy would get pulled up by a select few large companies, but the competitiveness would largely rest on the competitiveness of the SME sector which is the supply base for global and Indian customers.
SMEs have a large role to play in the growth of the Indian economy as they contribute a significant percentage to India’s GDP as well as to industrial development. The sector has a 40% share in industrial production. 35% of the total manufactured exports of the country are directly accounted for by this sector.
While SMEs have held on their own domestically, but for them to continue to be the engines of growth for the economy they need to be globally competitive. Simply put, this means they need to be able to provide best in class products at the best possible (read lowest) prices.
Quality, cost consciousness and adaptability to the ever-changing customer requirements are pre-requisites for survival. There is also a paradigm shift in the operating environment and aspirations of other important stakeholders – employees and shareholders. Employees aspire for enhanced empowerment and improvement in their skill sets. Shareholders desire greater return on investment.
What is many a times lacking is the availability of the tools and techniques to enable this alignment of goals of different stakeholders in a cost effective manner. There is the absence of an umbrella body to bring together the SMEs and provide them with handholding support and service. SME managements are focused on day-to-day problem solving with very little time to focus on larger issues. They do not have a platform to share common problems and successes.
At their individual level these organisation are unable to identify the right people to guide them through the journey to competitiveness and may not be able to afford very expensive consultants. They are not equipped to comprehend the ‘way’ forward without the handholding support. Hence the birth of this unique cluster approach with a specific objective of keeping the cost down and have a reasonable speed of improvement.
If the learning curve tends to be long and circuitous, leading to disillusionment with the trainers and the changes implemented. The sustainability of the initiative is lost and its impact never realized to its full potential.
Besides this, the earlier mindset for making improvements has always been through capital investments. Manufacturing Enterprise have poor capital investment capabilities. Waste elimination and effective use of available resources is not looked upon as a complementing option. Customer requirements are not taken up for drawing effective business plans. This leads to longer customer response time and creates problems of customer acquisition and retention.
Use of low-level technology in these units provides scope for improving productivity and product quality. There is little knowledge of latest techniques and benchmarks on productivity and quality. The target group also has limited access to skilled manpower.
There is reluctance amongst consultants to work with SMEs, due to lower returns in comparison to working with large companies who already have well developed infrastructure and well trained manpower.
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