Digital Transformation of MSMEs
Published on : Tuesday 03-11-2020
Darshana Thakkar makes a case for more automation in MSMEs for economic as well as safer operations.
All over the world, we are talking about emerging technologies under automation – Digital Transformation, Artificial Intelligence (AI), Industrial Internet of Things (IIoT), Edge Computing, Machine Learning (ML) and many more. With the invention of the smartphone, digital has become part of life for an average human being.
Where do Micro, Small and Medium Enterprises (MSMEs) figure on the digital scale? What about these industries in terms of technology? These emerging technologies are yet to gain a foothold in the MSME sector. Lack of awareness, limited resources, shortage of funds and security threats are the main areas of concern.
Digital transformation of MSMEs
How important is Digital Transformation of this sector? Consider these two points:
1. Competition from big players and other countries will be highest than ever before.
2. The economic slowdown increased globally due to pandemic and will increase competition from Chinese and European countries.
Manufacturing process automation and Digital Transformation of support functions are vital for MSMEs to survive and grow.
Automation: Describes the implementation of technology, software, and programs to accomplish a procedural outcome with little or no human interference. Digitalisation: Digital business transformation is about doing things differently – creating new business designs by using digital technologies in combination to blur the boundary between the physical and the virtual worlds. Analog to digital process.
Today, automation of manufacturing revolves almost totally around the capability of the computer to provide automation, optimisation, and integration of all of the different elements of the manufacturing system, and of the overall system itself. This generic ultimate approach to automation of manufacturing is today becoming called simply computer integrated manufacturing. The current status and potential of such automation in the metalworking manufacturing industry are quite good. The implementation of such automation is still in its infancy, the expected rate of its growth is very substantial. Further, even at this stage, tremendous economic benefits are being reaped from the implementation of this technology, and its potential for further benefit is very large Indeed.
Simple automation in manufacturing helps to reduce the cost drastically and improve the quality and delivery significantly. Of course, the initial investment in automation is also an area of concern especially for MSME industries in the current time of crises. But the return on investment is very good and the overall result in business survival and growth is amazing. In a time of rapidly changing technologies and shortening product life cycles, many companies are focusing on automation as a means for competing in a more demanding market.
Automation – A weapon for competition
I recommend our MSME manufacturing companies to focus on automation as a weapon for competition on a global market. Only we have to decide with due diligence on the level of automation and the allocation of tasks between technology and humans. Main points to be considered for decision making on automation include:
1. How much of the tasks, such as assembly, machining, fabrication, material handling, material supply, packaging, etc., are done manually or automated?
2. What are the benefits of using automation?
3. Level of automation – fully automated or semi-automated?
4. Is there any scope and benefit in the automation of support functions other than manufacturing?
To simplify, I would love to present this scenario with one case study of my one of the clients who is into capital machinery manufacturing.
The case study
The CNC machining centre is cost-effective in the case of mass production only, where similar parts are to be manufactured in large quantities. This is what an average engineering professional/entrepreneur believes and follows.
Some regions of our country like Gujarat, Maharashtra, Haryana and the NCR are the hubs for the machinery industry. It is very much difficult for the small capital machinery industry to adopt automation in the manufacturing process. The first reason is the scale of production. Capital machines are having comparatively lower market demand due to longer product life cycles. So the scale of production is also lower. That too distributed in many variants according to production capacity requirement. The overall demand pattern is also uncertain and difficult to forecast. Additionally, a single machine consists of a large number of components which may range from 100 parts per machine to 5000 parts per machine or so.
In such a scenario, CNC machining centre is not so beneficial at first sight and this is the reason many small capital industry owners are hesitant to do automation in manufacturing. Either they do outsourcing or produce parts on conventional machines. These processes tremendously increase the possibility of poor quality, delayed delivery, and of course overall cost of the product.
At one of my client’s factory, we have adopted automation in the machining centre. They are into capital, particularly metalworking machinery manufacturing. The company is manufacturing almost all components in-house to keep strict control on quality, to maintain its brand value and reliability of the final product. With the increase of global competition, Chinese and European machines of a similar kind are available in India in the Ex-stock shipping stage, with better quality, and at lower prices. We are not able to provide ex-stock delivery. Our standard delivery period for the smallest version starts from 6 weeks and up to 20 weeks also depending on the model.
Last year, we introduced the CNC Vertical Machining Centre (VMC) and CNC Horizontal Machining Centre (HMC) in our machine shop. Every single machine has eliminated at least 6 other machines and operators from our machine shop, viz., Facing machine, Slotting, Boring, Cross-boring, Drilling and Tapping machines. Now, above all operations are being done on a single machine with a single setting, just by feeding the program. Even if we manufacture parts in a batch of 5 units each, then also the cost of the part and time consumed is justifiable with the added benefit of accuracy and almost zero rejection ratio.
The direct and indirect benefit we have obtained are as follows:
1. Reduced manpower: Only one operator instead of 6, reduced labour cost
2. Reduced job set up time
3. Reduced power consumption
4. Reduced cycle time: Overall delivery period reduced by 2 to 5 week for various machine
5. Improved quality of parts with virtually zero rejection
6. Reduced depreciation and cost of tools as the whole machining process is being done in a closed chamber with enough lubrication. This increases the life of tools tremendously.
7. Clean shop floor due to proper scrape management
8. Reduced dependency on the outside vendor as such improved delivery of spares parts also and customer services, and
9. Last but not the least, reduced overall cost of the machine (final product) which helps to become competitive in the market.
The RoI
Here one question arises about the initial investment (cost) of the machine. Agree. It is there. Typically payback period on such investment falls around 2 to 4 years depending on the usage. But the indirect benefit of improved quality and delivery is huge, which helps in becoming competitive in the market segment. Apart from these, my special note to MSME company owners is that the government is also providing financial support and subsidy for technological upgradation of the manufacturing process, especially to MSME organisations. So dear entrepreneurs, take the benefit and upgrade your process.
One more problem associated with automation is the skilled manpower/machine operator. Here is good news that with the emergence of technological advancement, many private and government institutions provide vocational training for new technologies.
To sum up
The purpose of automated systems is to perform functions more efficiently, more reliably, and more accurately than human operators. Also, automated systems can perform functions and tasks at a lower cost than human operators. With higher reliability, a system would be a safer system as well as increase human safety.
Therefore, even though financial measures are the driving force in adopting technology and automation, an automated system is more economic as well as a safer system. As such, automation enables cost reductions that too with increased efficiency and productivity. This leads to increased competitiveness in a more demanding market. Many companies acknowledged that the introduction of automation provides possibilities for an improved work-environment by eliminating monotonous and physically demanding work situations.
Darshana Thakkar is MSME Transformation Specialist and Founder, Transformation – The Strategy Hub. An Electrical Engineer followed by MBA – Operations with rich industry experience, Darshana is an expert in transformation, cost reduction, and utilisation of resources. She has invested 25 years in Transforming Micro and Small Enterprises, and is passionate to dig out the hidden cost from the organisation and implement appropriate strategic action to achieve lasting transformation in terms of improved bottom line and profitability. Darshana works with businesses that are looking for sustainable profitability and growth in the globally competitive environment with ever-increasing cost and customer expectations.
She is providing handholding to MSME in the following ways:
1- To define a strategic growth path
2- To establish Marketing and Customer support strategy and plan
3- To develop an operational process for various functions in line with organisational culture
4- Organisational restructuring and strategic planning across the function of the organisation – Planning, Procurement, Production, Stores, Marketing, Accounts, and HR
5- Effective resources Utilization: Material, Machines, Manpower, Money, Time, Date & Technology
6- Training of business function to improve employee performance, and
7- A catalyst for Automation and Digital Transformation of the organisation.
Apart from this, Darshana is passionate to support the start-up ecosystem of our country. She is associated with CED, Government of Gujarat as Expert Business function faculty in the Entrepreneurship development program, as faculty for industrial subjects in Second Generation program (SGP), and as a start-up mentor and member of the start-up selection committee in the incubation centre set up by CED.
