Back to ArticlesEvolving Digital Priorities For India's Manufacturing Smes
- Published on - Jan 09, 2022
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Indian SMEs account for 17% of the national GDP and constitute 90% of the industrial units. Forming the backbone of the economy, do SMEs have what it takes to compete in an increasingly digitizing economy? The B2B landscape in India is ripe for accelerated digital adoption, and the recent pandemic has only acted as a catalyst; pushing industry leaders to rethink and reprioritize their digital transformation agenda. Here are two key categories driving this shift in India's business landscape.
Continuity-driven priorities
Businesses must focus on these areas to recover from the pandemic's shock and resume their operations:
- Human capital-dependence: Small and medium-sized manufacturing relies heavily on migrant and local labor to conduct their operations. With distancing norms in place and migrants moving back to tier-1 and tier-2 towns, a number of businesses had to stop production. Business owners should, therefore, find new ways to enable activities that previously relied on human resources. For example, product pitches and customer support can be enabled through video-conferencing and voice technologies like PRI solutions and SIP Trunks.
- Inefficiencies in production and distribution: Small and medium manufacturing businesses in their current shape are subject to a number of inefficiencies. According to a 2018 study, small-sized manufacturing enterprises' production efficiency reduces by 2-3% as capital stock ages by a year. Relying on old technologies and manual processes has only amplified pandemic-related challenges. SMEs should look at cost-efficient solutions that bring value out-of-the-box. Examples include the use of sensors to eliminate monitoring and manual control in production processes. In fact, many SMEs are already deploying IoT devices for inventory management and stock control, GPS-based monitoring systems for tracking their fleet and managing their workforce in realtime, and RFID tags to monitor the movement of goods and parts across the factory and the warehouse. These solutions can help business owners eliminate the need for inventory monitoring and audit personnel, and simultaneously reduce human reliance on the production floor and the warehouse alike.
- Supply and demand-related challenges: A number of firms across industry segments were recorded to mention raw material shortages, some highlighting fulfilled capacity of raw materials at sub-50% levels at the onset of COVID, while the number was much higher for exporters. While some are adopting 3D printing to reduce their reliance on contract manufacturers, such a move might not be possible for smaller firms. However, enhancing communication along the upstream and downstream supply chain through voice and video technologies and diversifying the supplier list for critical components can help businesses strengthen their production planning and execution efforts. Video-based technologies are clearly the winners for Indian manufacturing SMEs in terms of costs and benefits.
Thriving beyond recovery
Beyond continuity, enterprises must aim to thrive in this new normal. Here are some of the guiding principles for building a competitive edge post-recovery:
- Adopt digital platforms: Digital sales is slowly making inroads into the Indian B2B manufacturing landscape. While small manufacturers rely on physical one-to-one interactions for sales and logistics partnerships, an extended pandemic recovery will help digital sales dig deeper roots into the economy.
- For medium-sized manufacturers, now is the time to invest in Cloud CRM solutions which come with zero-infrastructure costs on a subscription model. Enhance your information highways: As SMEs grow digitally mature, leased-lines and cloud-enabled voice channels will become the backbone of a connected manufacturing enterprise. Wearable computing technologies like AR and VR will help service-heavy industrial enterprises bring efficiency into on-site interactions.
- Expand your IoT network: IoT can help small businesses lay the groundwork for low-level automation. In addition, small investments in IoT can come with big incremental benefits.
While India's SMEs have some way to catch up and embrace the complete Industry 4.0 paradigm, the pandemic, in addition to other macro-environmental variables, has provided a solid opportunity for enterprises to turn this needle and emerge as the new leaders post-pandemic.
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Small and Medium-sized Enterprises, better known as SMEs, are the backbone of the Indian economy. As of 2022, Indian SMEs constitute 90% of the industrial units and account for 17% of the national GDP. This makes Indian SMEs one of the biggest contributors to national growth and development.
The pandemic has also promoted the culture of SMEs in India, as local entrepreneurs are looking forward to developing profitable businesses by driving digital transformation into the traditional business culture in India and scaling new heights in terms of growth.
The Indian business sector and B2B landscape are rapidly progressing towards digital adoption. Whether a new startup or a well-established enterprise, each business in India is looking forward to complete digitalization. Also, the recent pandemic has acted as a catalyst for boosting digital transformation trends.
To compete in the rapidly digitising economy, Indian SMEs need to rethink and reprioritize their digital transformation agenda. Business owners and entrepreneurs must keep themselves updated with the latest advancements in technology to cope-up with the trends of digital transformation in each business sector.
How can digital transformation help Indian SMEs to overcome the problem of human-capital dependence?
The manufacturing and production of small and medium-sized enterprises mainly depend on migrant and local workers to lead their tasks. Several SMEs were forced to stop manufacturing and production because of the distancing norms imposed due to the pandemic and labour moving back to tier-1 and tier-2 cities.
To address such issues, Entrepreneurs must track down solutions that can enable activities previously dependent on human resources. Digital transformation in the manufacturing industry can bring several such solutions for Indian SMEs and eliminate their human-capital dependence on production.
The Indian small and medium-sized enterprises are facing a number of inefficiencies in their current shape. These inefficiencies are mainly associated with the production, manufacturing, and distribution processes. A 2018 digital transformation manufacturing case study shows that the production of small-sized enterprises reduces by 2-3% due to these inefficiencies.
Relying on manual processes and old technologies is the primary reason for such inefficiencies in production and distribution. In addition, pandemic-related challenges such as restricted movements and safety protocols have amplified inefficiency issues.
Production and distribution inefficiencies have severely affected the business of small and medium-sized enterprises. However, digital transformation for manufacturing enterprises can help to address these issues efficiently. SMEs look for cost-efficient solutions that can bring better value to them.
Some examples of top digital transformation trends in manufacturing include IoT devices for stock control and inventory management, the use of sensors to eliminate the hassle of manual control in manufacturing processes, and GPS-powered tracking systems for managing the distribution of products.
Supply and demand-related issues brought new challenges for SMEs post the COVID-19 pandemic era. The biggest challenge for small and medium-sized enterprises is to overcome the problem of raw material shortage. Due to the restrictions during the pandemic, the import of raw materials became expensive.
On the other hand, Some enterprises reported excess raw material storage in warehouses due to decreased production. This occurred due to the decrease in demand for products in the market. Although in both situations, enterprises were making losses during the pandemic period.
Digital transformation in manufacturing can be an ideal solution for SMEs to ease supply and demand-related challenges. Software and applications for inventory management help entrepreneurs monitor the import and export of raw materials and finished products from their warehouses.
Also, the incorporation of enhanced communication solutions along the upstream and downstream supply chain can help the business owners to strengthen their planning, production process, and execution efforts. Such transformations can benefit Indian SMEs in terms of time, money, and resources.
After the pandemic era, Indian SMEs must aim for complete digital transformation to help them survive in the highly competitive market. Here are some ways to proceed toward digital transformation;
- Adopt Digital Platforms- Digital platforms have become the best source to drive sales and create a customer base in the Indian B2B and B2C landscape.
- Expand IoT network- Basic IoT networking can help SMEs introduce low-level automation into their business processes. IoT trends in manufacturing are helpful in different aspects of a business.
- Invest in cloud CRM solutions- Cloud CRM solutions are great for SMEs to digitise their every business process at a very low cost and get incremental benefits.
