By Vandana Sonwaney
SMEs and MSMEs have been acknowledged as the backbone of the Indian economy and the government has introduced several initiatives to boost them. Make in India, National Skill Development Mission, Atal Innovation Mission, along with reforms like GST, are a few promising boosters for SMEs. Simultaneously, major disruptive trends due to the advent of technology are not only opening opportunities, but are also throwing up innumerable challenges for businesses across several sectors. The innovative technological platforms have brought on board even small players in the field, thus enabling smoother transactions, procurement of raw materials and industrial goods, forging a better connection between suppliers, manufacturers and retailers. Adoption of web- as well as mobile- based technology has opened new channels for B2B e-commerce firms focused on the SME sector.
Given the technological trends, global competition and immense opportunities, this is a phase of reinvention for SMEs. They operate in the same environment as the large-scale industries, but lack proper business management practices, skilled labour, financial skills, performance monitoring of business operations, and have often have unskilled or incompetent management. They are also disassociated with the benefits of adequate capital that their larger counterparts enjoy. SMEs encounter increasing competitive pressures fuelled by globalisation, legislation and the relaxing of trade barriers, as well as an increase in market expansion due to emerging technologies and innovation.
The challenges SMEs deal with in a globalised climate include low productivity, poor financing, lack of administrative abilities and management access, besides technology and a heavy burden of regulation. These challenges can be paralysing, leaving them with little flexibility and subsequently lower efficiency compared to bigger firms, due to their inexperienced organisational structures. They have little power compared to larger and more established firms. Therefore, they cannot be as challenging as larger firms, concerning product quality price. Consequently, SMEs are often more susceptible and have to find more competitive advantage sources.
Typically, SMEs manage to sustain themselves because of their adaptability and agility, close proximity to their customers, their openness towards new ways of working, and their risk-taking approach, but many MSMEs are susceptible to major challenges because of operational risk-which is the potential loss resulting from inadequate or flawed internal processes, people and systems, or external events. This calls for SMEs to attain the highest levels of efficiency in business processes to stay competitive. Operational excellence plays a buffer to these risks.
On adopting principles of operations management, SMEs can maximise insights from their company data using real-time reports, maintain and improve customer relations which are even more significant for smaller organisations, allow for greater flexibility, decrease cost of producing goods and services, boost revenue, increase productivity, and prepare for future innovation relying on a solid base of operations skills and knowledge.
Considering the tremendous advantages the application of operations management brings to SMEs, there is an increase in the number of educational institutes offering the study of operations management. The best B-schools recognise that operations management is the crux of management education, and have created robust programmes to equip students with necessary skills and knowledge that the potential employers value.
The author is director, Symbiosis Institute of Operations Management (SIOM), Nashik