Challenges Faced by MSME Foundries in India

&KDOOHQJHV )DFHG E\ 060( )RXQGULHV LQ ,QGLD Manish Kothari Managing Director, Rhino Machines Pvt. Ltd. MSME foundries form the backbone of the manufacturing sector in India and have a great opportunity to grow, but face a lot of challenges as well. Many of the issues are common among MSMEs which vary across different states in India. Rhino Machines customers are 90% or more MSME’s and this gives a lot of insight into the challenges and opportunities of being an MSME. The following is an effort to put together the learnings of 25 years of experience with the Indian Foundry Industry.

The MSME Segment Size In a survey few years back, the industry was analysed into 6 different levels based on the output tonnage.

Foundry Type

TPA

in Nos.

% in terms of tonnage

Level 0

30

3000

0.19%

Level 1

30-750

2500

3.99%

Level 2

2,40050,000

1000

63.88%

Level 3

upto 60,000

200

25.55%

Level 4

60,000 100,000

30

6.39%

Level 5

>100,000

0

Does not exist

This means Level 0 & 1 make up more than 80% in terms of numbers, however, considering average of the output capacity of the foundry, it is the level 2 & level 3 foundries which really deliver the maximum production.

MSME would constitute Level 0, 1 and most of the Level 2 foundries i.e. more than 50% of the casting production in tonnage in India is coming from foundries falling in this industry segment.

As a natural progression, every foundry increases its capacity over time and will shift levels, which in numbers will only increase the MSME tonnage contribution.

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But is our infrastructure, human capital, technology, machinery, government policies in sync with the available and expected demand. And what are the opportunities and challenges for the Foundry Industry?

The Challenges ž

Attitude

The

# quality‌�Chalega� is a word which has to be thrown out of the manufacturing dictionary. However, the core strength of Indian attitude of accepting and adapting to situations has to be balanced, without affecting the quality and time criteria. ž

Process Know-how

We say that we discovered “0�, we did lot of development in science, mathematics, and it is a reality, however, we never leveraged these to the next level. Process development in our country is considered a huge burden and cost. We are now inviting experts from Europe for providing us support for the process know-how.

However, at the same time, we are not putting ourselves together to see that this know how is documented, absorbed and transferred to the next generation. We do possess a tremendous intelligence and can absorb the process know-how, and need to put together a focus 41 Vol. 62 No. 11 November 2016

that in few years we should be absorbing the process like a “sponge� and then transferring this through the appropriate channels to one and all in the country. Today even Europe does not have this advantage with the diminishing interest of the new generation and the rising costs to document and leverage its knowledge. We are ready for this and need to structure the same.

VET Schools in Winterthur, Switzerland arranged by our knowledge partner SkillSonics, I realised where we need to go. The facilities for training, methodology and system were probably not available in our engineering institutes too. We need to focus on higher practical teaching with a combination of theory, which unfortunately is not happening today.

ž Quality Standards

Without a good and well-skilled force, we cannot grow.

It is pertinent to say that there is also a social barrier today; as we are always expecting the skilled working persons to be from the “lower strata�. The middle-class segment needs to understand that the skilled job is not of a lower social status. It is not necessary that all science students become engineer or doctors. To bridge the gap the skilling has to happen across the society irrespective of the social status. The dignity of labour has to change, and it is only this which can make the ‘Make in India’ successful.

ISO has been played around with, and ISI Mark also.

The authenticity of the QS norms have been so much distorted in India that it is impossible for somebody to

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an urgent need to get the sanctity of the QS to rebuild

' * +

"

of our deliverables is always at a question. We incur

" # $ " we consider this only as a “paper�. Time has come to understand why these systems are there, and make it part and parcel of our habit. Quality is a habit, not a # "

# ; ; " #

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the quality and deliverables of the Indian Manufacturing Industry. We need to really see – what is the actual use, and how effectively are we using it. ž Skilled Workforce There is a huge shortage of trained, skilled workforce in the country. Instead we have more of “unemployable� engineers, who are totally disconnected from the real industry world. Typically an Indian manufacturing needs a hierarchy approach – Supervisor to watch over the work of technicians. The remuneration of the real worker is therefore transferred to the supervisor, creating a huge imbalance in the socio-economic structure. Secondly the output per person or in other words productivity is very poor.

Probably this is the biggest difference and game changer.

India has a tremendous advantage in multi-skills, multitalent, intelligence, and language, management skills supported by our very rich and strong cultural heritage of inclusive living. However, the country’s education system has taken a completely wrong direction over the last few decades. Instead of focussing on skill and vocational training, we have focussed more only on higher education, leaving a very vast widening gap in the working level.

During my visit and discussions with German, Swiss and Italians, the author found they start to nurture the skills

<=" #

course, and then grow further. During visit to one of the 42 Vol. 62 No. 11 November 2016

ž

Reliability

This is related to the â&#x20AC;&#x153;Zero Defectâ&#x20AC;? term used by the Prime Minister. The produce of each stage of manufacturing be it component, assembly, machine or project has to be

[ ;

OEM or intermediate or the end-user, all are unsure of the reliability of the produce of India. In addition, the cost of

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also increases the cost of manufacturing. ž

Value Stream Mapping or Lean Manufacturing Practices

To compete in the global supply chain, it is essential to recognise, identify and eliminate non-productive costs in the manufacturing processes. This has to be embedded in the core business values and documented.

There are policies from the government, which need to be understood, embraced and adopted in totality. Only

; ; # \ " ] ; to transfer right to the bottom of the pyramid.

Some Suggestions Every opportunity has a challenge, and every challenge should have a way outâ&#x20AC;Śit is a continuous process. Looking at the major challenges, here are some suggestions from our own experience and interactions with several industries. ž

Quality [

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from the bottom-most working hand in the manufacturing process. It is important to engage all levels of organisation collectively. This will require not only QMS tools, but equally important to change their personal habits and align them to the system

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motivates the industry to improve themselves, and allow the industry to have access to solutions which can help them adapt and move forward. With data acquisition tools, automated documenting and Indian expertise in software, such solutions should be possible.

needs. The need for the right tools, instruments and right working environment for the working team is to be recognised, to ensure the quality of product.

Lack of resources is a common issue faced in Indian environment. ž Cost & Time Management â&#x20AC;&#x201C; What cannot be measured cannot be controlled. Embracing and understanding of solutions to map the costs, time and means of optimising shall ensure timely delivery, at lower costs, making the organisations more competitive. The issues are always resolved on a long-term & short-term basis. Here are some long-term solutions which need to be addressed. ž

Sharing of Information â&#x20AC;&#x201C; The market is huge, and sharing information with competitors should be encouraged at all levels to embrace best practices.

The industries must change the mind set and interact with similar producers and improve their quality.

ž

Private Cluster Approach â&#x20AC;&#x201C; instead of depending on the long process of government support for clusters, industries should come together to invest collectively, to have access to sustainable manufacturing facilities, where they cannot themselves justify due to underutilisation. The industry has to come out of â&#x20AC;&#x153;secrecyâ&#x20AC;? mind set, and move forward. Common facilities such as pattern development, casting simulation, sand reclamation, testing facilities, consulting arrangements, bulk purchasingâ&#x20AC;Ś.so many areas industry can save wastage by coming together without waiting for government intervention.

ž

Dependence on Government for â&#x20AC;&#x153;Subsidiesâ&#x20AC;? ^

# " ; $ # # \

# $ #

more than the subsidies expected. It is a normal practice to transfer the focus on trying to save money from subsidy, which is one time, rather than save money in process & operations, which is lifetime and recurring year-on-year.

There is no single or short-term solution to any problem.

But it is pertinent that the MSME industry needs more

;;

are too many agencies and complexities for a young entrepreneur while running an MSME. ž

Taxation â&#x20AC;&#x201C; Sales tax, excise, service tax, cess, local tax, income tax, professional taxâ&#x20AC;Ś..some are getting sorted out now, but still too complicated for an MSME to handle alone and have to depend on consultants.

ž

Banking & Loans â&#x20AC;&#x201C; what seems on paper is very easy such as MSME schemes, Bank loans, govt supports to avail them is again a herculean task. The amount of paper work and signatures an individual has to make blindly on documents is humungous. Many a time, the author would have signed probably 500 pages for a loan of 10 lakhs not knowing what he signed was? Is this necessary? Accountability of time of loan, and the lack of knowledge of the MSME, often lead to delay in their project by 3-6 monthsâ&#x20AC;Ś _ #

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Lack of Entrepreneurial Training of MSMEâ&#x20AC;&#x2122;s â&#x20AC;&#x201C; Most of the owners lack in formal training or guideline on managing business. There is a need of business clinics which could help these young entrepreneurs to understand the importance of commerce, documentation or even technical information related to their business domain. This hand holding will strengthen the MSMEâ&#x20AC;&#x2122;s and make ;

Government has to shift from subsidy only on type of industry to key performance indices for the

" \ " " safety, work environment, health & safety norms which will encourage the industry to improve their

The author has been in an MSME for 25 years, and working with MSMEâ&#x20AC;&#x2122;s across the country, and most of the feedbacks are based on what he has faced and encountered. Yet, there is one area which still puzzles the MSME is transition to a larger corporate. This probably is

business.

ž

# \ ; $ benchmarks, and create an environment which

The opinions and remarks made in this article are based on the authorâ&#x20AC;&#x2122;s personal experiences and observations.

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Indian Foundry Journal

43 Vol. 62 No. 11 November 2016