World MSME Day: Sector reform to overcome logistical and technical hurdles

Employing over 111 million people in an industry that generates nearly 27 percent of the country’s GDP, the MSME sector plays a key role in economic growth, according to the Ministry of Micro, Small and Medium-sized Enterprises.

On International MSME Day 2023, here we take a look at how the sector is reforming to break down logistical and technical hurdles and enable companies to thrive in an increasingly digital and connected world.

The logistical challenges faced by MSMEs in India have long been a barrier to efficient operations and growth. Due to its dependency on logistics, the sector has been badly affected by the Covid-19 pandemic, according to industry players. Another major challenge for the industry is the implementation of e-commerce solutions.

According to Pirojshaw Sarkari, Managing Director and Chief Executive Officer of Gati Ltd, MSMEs have limited capital and resource latitude and cost efficiency remains a critical factor for the sector. He also stressed that MSMEs rely heavily on the operational efficiencies of their external logistics partners to strengthen market competitiveness and increase profitability. He said, “Faced with the intensely competitive market scenario, companies now prefer to keep inventory closer to their target markets to improve delivery efficiency.” A logistics company with a well-developed transportation and warehousing network helps small businesses with a cost-effective and robust backbone for the service delivery.”

“Small businesses now want their logistics partners to manage multi-site pickups and deliveries with immediate help and intervention. At Gati, the MSME segment – ​​both formal and informal – remains a key focus for us,” he added.

He added that the National Logistics Policy (NLP) launched by the government in September 2022, aiming to cut logistics costs by half, will pave the way for a comprehensive logistics ecosystem for the MSME sector.

According to Shailesh Kumar, founder of CABT Logistics, the NLP would support the One Nation, One Market objective and provide a flexible regulatory environment. “By doing so, we ensure that we use the potential of the industry not only on the domestic market, but also on the international market. It will help create a repository of all stakeholders and build a strong platform that can also serve the overseas market,” he said.

Anshuman Singh, Chairman and Managing Director of Stellar Value Chain Solutions Pvt Ltd said the country is making significant progress in improving its logistics efficiency through the development of dedicated freight corridors and the launch of PM Gati Shakti’s national master plan to build multimodal connectivity. He claimed, “For MSMEs, the fragmented supply chains, proper warehousing and transportation infrastructure often impede the achievement of cost efficiencies.” However, with the introduction of the Unified Logistics Interface Platform (ULIP), improved infrastructure, streamlined processes and the adoption of technologies are helping MSMEs help to realize the full potential of the MSME sector in India.”

Regarding the advancement of e-commerce technology and its implementation in the MSME sector, Singh said, “Technology, especially data-driven technology, has brought greater efficiency and transparency in supply chain management, resulting in improved inventory control, route optimization, etc. in real time -Tracking. MSMEs with a progressive attitude adopt digital technologies aggressively. In the age of data analysis, MSMEs use digital technologies to identify growth markets and evaluate delivery performance, among other things. However, cost constraints are a significant obstacle. Investing in technology infrastructure, software and skilled staff can be a financial challenge for smaller companies with limited resources.”

The launch of programs such as the Pradhan Mantri Mudra Yojana (PMMY) and the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) aimed to improve credit availability for MSMEs. Collaboration with non-bank finance companies (NBFCs) and fintech platforms has also facilitated access to finance.

SolutionBuggy Chief Technology Officer Guruprasad Bracelet pointed out that MSMEs are now aggressively taking action to adopt the use of technology. “The introduction of barcodes has largely reduced theft in logistics. To some extent it was also possible to track material movements and product sales from the shop counters. This contributes to better inventory management and allows for a more refined view of production planning and forecasting. There are still challenges in dealing with product loss in transit, theft, etc. We are currently using a SaaS based product that allows access to much of this data. It’s still early days for us as we don’t yet have enough data to draw meaningful insights from it, but over time there will be good data collection leading to better tracking and forecasting,” he said .

To encourage technological upgrading, the government has introduced schemes such as the Technology Upgrade Fund Scheme (TUFS) and the Digital MSME Scheme. Promoting partnerships between MSMEs and research institutions promotes innovation and facilitates technology acceptance.

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