Waste elimination as a tool for operational excellence

Importance of MSME manufacturing companies and challenges facing them

Micro, Small and Medium size Manufacturing companies in Indian context are becoming a critical contributor for engineering output. Take automotive sector or other engineering product manufacturing sectors, supply chain forms a very important aspect of their overall strategy. Gone are the days when starting from casting or moulding which is the major input for all of the engineering company, till the service of the final products are done in-house by the large companies. With more engineering jobs started coming to India and India becoming a major consumer of engineering goods, the large manufacturing companies were unable to scale-up the entire value chain. So they had started outsourcing some of the fringe low tech activities in late nineties. But as time progressed, cost efficiency became super critical for survival. Being large company and span of control being very high, cost efficiency challenges started staring at the large companies. So what started as moving out non-critical low tech outsourcing,  slowly got transformed into cost control exercises in the name of low cost outsourcing. Companies started to outsource to get cost advantage. Make or buy decisions were taken with cost as a main parameter. As market grew with increased demand, both local and global, outsourcing became as part of large companies growth strategy. Large companies started using outsourcing as scale-up strategy. The cost has to be low but at the same time the performance like quality and delivery also to be bench marked to best in class. Hence large companies started to call them as best cost sourcing.

So today we have a huge SME pool in manufacturing industry, who were used by large companies for varying needs at different points in time. First generation MSME companies were started mostly by first gen entrepreneurs to improve their social status. Later, as more people jumped into the wagon it became a survival opportunity for overwhelming majority. Till today MSME is thriving because, the owner links his survival to the health of the company, even how much ever small it may be. In the process of growing MSME manufacturing companies, actually the larger companies have started to be dependent on small companies. Today no large company can even survive if they do not have good pool of smaller companies. Hence the reversal of dependence has just begun. The scenario of competition is also started surfacing. Though smaller company services the requirement of larger companies, they also face the competition from large companies. The competition is for skilled manpower. Today the skilled manpower is shrinking in manufacturing sector, the large companies also vie for the same manpower. But the SME fight a losing battle in this front as the large companies become the natural choice for a qualified manpower.

There are two parts to the skilled manpower. One is skill and other is manpower. First let us see the manpower portion to it. All if not most of the SME’s have a big challenge to fill the human being headcount who put their hands and head to work. For a person with reasonable technical qualification, getting into manufacturing sector itself has become the second choice.  There is always a shortfall in the fill rate. The next is skill. These skills are both administrative and technological skills. The owner or the a relative to the owner manages this on a day to day basis. The supplier development specialists in the customer organisations are given a mandate to support the owner in giving input for the technological skill requirements. The administrative skills have to be necessarily to be filled by the owner. The trust between the supplier development specialist and the owner looks wanting as the motive of the SDS is looked with suspect. The owner finds himself sunk in the administrative requirements and attending to the day today things, he hardly finds time to understand the technological needs and challenges faced by the company. Because of this the company looks to be always in the fire fight mode. The question to be asked is where the operational excellence road map is. Where are the gaps in the demand Vs actual in this road map. What he has to do fill the gap, so that he looks beyond just meeting to the customers requirement, to setting his own agenda of growth. This gap is increasing day by day with more jobs coming by his way. It is the responsibility of industry to support the MSME companies to fill that gap.