Problems related to Production-

Problems related to Production-

Some rural industries like food processing industries are facing the serious problem of seasonality of raw material (agriculture and horticulture surpluses) in the required quantity and quality at the appropriate time. Due to financial problem these industries cannot afford these raw materials at high prices.

However the government tries to regulate the distribution of raw materials through allotting the share among the sectors, but it has been experienced that the rural entrepreneurs dispose of their raw materials at higher prices to the big industries and thereby earns profit without producing goods.

Besides this, Indian SMEs rarely emphasizes on material management. They generally focus on saving on cost of purchased material by pressurizing the vendors. The vendor may accept the order at lower price, because he may be short of orders at that time. However since he is not getting much margin on this order, he will give it a low priority and there is a strong possibility of delayed supplies, which may result in stoppage of production or buying the part on emergency basis by paying a higher price. Both eventualities may cost more than the anticipated savings due to lower purchase price.

The Indian SMEs normally concentrates on maximizing the quantitative output of the product and their finished products are often subject to inferior quality. There is a misconception among managers especially in SMEs, that quality improvement efforts affect productivity and adds extra costs, making the products non-competitive. A number of studies abroad and recently carried out even in India, has broken this myth and shown the opposite effect that planned quality improvements, not only enhances the product quality, but also results in cost savings, which helps the bottom-line of the company. Moreover these products are basically not standardized and certified from the authentic authorities and fails to attract the loyal customers of branded products of large units. Therefore their products can only target the poor section.

The main reason behind the above problems is the technological backwardness. Though India ranks at top in terms of availability of human resource in science and technology but technology intervention in Indian MSMEs, in absence of extension and demonstration facilities, is still very low and as a result the cost of production is much higher in India than other developing nations. Now rapid technological changes are sweeping the world but majority of Indian MSMEs are still living in the 1980’s era when it comes to technology.

Entrepreneurs need to understand that technology does need investment but can save a lot of operational costs in long run. It is very imperative to have a review of the current market updates in terms of technology and process followed across the globe which can save the cost of production, can increase the productivity and output and hence enhance your profit margin. In today's competitive world it is very important to be updated on the latest technology and innovation to ensure that you are not left behind from your competitors.

There are three distinct factors which intimately impinge upon technological status of these industries: distinct pattern of small unit production organization; imitative rather than innovative technology; and poor availability of managerial techniques (Bipin Behari). Moreover MSMEs neither have adequate resources nor the necessary inducement to switch over the new technology. Just because the technology is not available in your country doesn't mean that you cannot use it, Technology transfer is now very common across the globe. This technological gap not only reduces productivity and affects the quality of production but also increases drudgery and impacts on the health of the workers.

Moreover the adoption of ICT by the Indian SMEs is extremely low. In the manufacturing industry environment the ICT can increase productivity through its capacity to reduce costs, increase the capability of machinery, and provide increased flexibility in production planning and scheduling. ICT allows for increased scale and speed of machinery operations as well as an expanded management span of control/coordination. Increased capability comes about through the digital control hardware embedded in the machinery and the process execution systems that monitor and control factory operations. But unfortunately as per the governments estimates the ICT adoption among small business in India is less than 30%, and if the IT firms in the SME segment are not considered, the number will be significantly less. The main reason for low adoption is that the first generation small firm owners are not technology savvy and are extremely uneasy to adopt new technology. Moreover many clusters are located in semi-urban areas or rural areas and therefore, cannot avail the benefits that communication can bring in. The small firms of India have significantly less funds compared to their competitors and therefore, they cannot adopt ICT in SMEs.

SMEs play a pivotal role in the overall industrial economy of our country. Despite of Government’s much flaunted programmes Indian SMEs are still facing the above problems. Therefore government should prioritize the benefits of these units and must take some revolutionary steps to resolve these problems.