Four mantras to be adopted by SMEs in the changing global market
FOUR MANTRAS TO BE ADOPTED BY SMEs IN THE CHANGING GLOBAL MARKET
SMEs form the waft and webs of the national business and industrial fabric. The strength of the SMEs, directly or indirectly decide the stability of many of the global economies. Statistics apart, today Indian economy is highly dependent on the SMEs and their strengths.
In a healthy and sustaining economy, SMEs - BOTH IN MANUFACTURING AND SERVICE SECTORS - need to restructure themselves periodically - their doctrine, working and mindset - to fall in line with the change in the overall characteristics of the market and its aspirations . One such major change in the vision and approach of the Indian nation are reflected in the move to "Make in India" and "digitize India". Such policies reflect the change in the will of our Nation - i.e. to change their economic and leadership status - at a global level.
What should Indian SMEs do to align themselves to the changing mood? How can they benefit and continue to be significant contributories to the changes? The following four mantras will help the SMEs to meet the changes for their benefit. Though the mantras are generic and applicable to all sectors, they are substantiated more specifically for engineering sector for the sake of easy understanding.
- Modernize the Machines, systems and methods: In late nineties markets wanted different discrete quality and finish in the products at differential price levels but always with a long life. For example the products were tested for a million operations irrespective of the period over which they would hit that million level operation. Today, the market expectation is to have singularly high or the best available finish and quality. Customers are not waiting for the product to become obsolescent but want to switch over to a better product the moment newer features are brought in. That is to say, market is ready to accept relatively lower product life. This thought has been further strengthened, as the product design and features undergo major changes for the better almost every decade or even lesser duration. These changes are due to the market expectation that the high quality and finish is imperative and irrespective of their functional suitability and specially “needs”. The market is ready to accept lower life of the product but cannot accept lower finish and quality irrespective of the cost bracket.
Accordingly, the machines and processing equipments have undergone major changes over the years - to ensure high reliability and achieving repeatable quality of the products manufactured. Changes in better processes and methods have followed almost the same logic. We can cite a simple example in this context in the engineering sector.
- In today's market, a majority of customers is not willing to accept a simple "rough machining" finish though that finish is functionally adequate. The customers expect that the finish should be one of "fine machining" irrespective its other implications.
This market evolution has pushed SMEs to change their processes and methods along with the machines. No doubt this involves capital injection. SMEs should accept this change in the market needs.
There is also a need for the Government and its agencies to support and encourage "machinery replacement/modernization plan" by suitable measures. This should be an integral part of the SME development program. No cosmetic change would be adequate and a major replacement policy is inevitable for the SMEs and in turn for the growth of the national economies.
- The market expectation is far more in this area i.e. from the service industries. To cite a mundane example the expectation from a taxi driver is to give a proper printed out receipt with the travel details explaining the logic for the fare. This simple example brings out the need for better amenities and fringe benefits - though "not a need" in a majority of the customers - that too at no additional cost.
2. Quality at all costs to ensure market share: as explained in the earlier mantra the market is getting used to better products. The concept that "better quality necessarily means higher cost" is negated by the development of better processes and methods which increase productivity at the same and with marginal increase in cost. Constant and ready availability will compel the market to absorb such marginal increase.
- A typical mundane example is the packaging methods. No one would have dreamt to accept of bottled water a decade ago (which has a cost element) but now is accepted almost as "routine".
- Referring to engineering sector, the batch size has come down drastically with the possible use of CNCs and more now based on 3D printing. It is now feasible to make one number of a complicated component using this concept - that too at marginally higher but acceptable costs. The lead-time and the simplicity of making (in comparison to conventional prototype making processes) make this route as preferred.
3. Focus on core areas and adopt newer technologies and approaches like - net marketing and "on line" transactions. This will enable the SMEs to contain their costs and thereby continue to be economical for the users. This necessitates SMEs to skill themselves in the areas of ICT. They should skill all their constituents - both entrepreneurs and workers.
For example, with the proper use of ICT, an SME in a remote area near Agra can meet the supply needs of a correspondent SME on the needs for a "one off spares" in Nevada in USA - without any help from help from any intermediary agency and the associated costs and time.
4. Innovation is the essence of business in the modern world. Change for growth and growth for change is the key in the current global market. The changes have to come from within the SMEs. All agencies including the government can only be a facilitator. A change can be as follows: SMEs should start specifying their market based on their process capabilities and not by the narrow range of components that they were regularly making.
- For example pump makers should look at the larger area of rotating machinery segment for their market – for components and spares. No doubt such product range expansion would warrant marginal investments but that is inevitable in the current market situation.
If the above mantras are accepted and adopted, SMEs can make a quantum jump to align themselves with the market expectations.