With over 111 million people employed in an industry that generates nearly 27 per cent of the country’s GDP, the MSME sector plays a key role in economic growth, according to the Ministry of Micro, Small, and Medium Enterprises.
On International MSME Day 2023, here is a look at how the sector is reforming to overcome logistical and technical hurdles and empower businesses to thrive in an increasingly digital and interconnected world:
The logistic challenges faced by MSMEs in India have long been a barrier to efficient operations and growth. Given its reliance on logistics, the sector was severely affected by the Covid-19 pandemic, say industry players. Another big challenge the sector faces is the implementation of e-commerce solutions.
According to Pirojshaw Sarkari, Managing Director and Chief Executive Officer of Gati Ltd, the capital and resource bandwidth is limited for MSMEs, and cost efficiency remains a critical factor for the sector. He also highlighted that MSMEs lean heavily on the operational efficiency of their third-party logistic partners to strengthen market competitiveness and boost profitability. He said, “Given the competitive market scenario, companies now prefer to hold inventories nearer to their target markets for improved delivery efficiency. So, a logistics company with a well spread-out transportation and warehousing network helps small businesses with a cost-effective and robust service delivery backbone.”
“Small businesses now want their logistics partners to manage multi-location pick-up and deliveries with immediate assistance and interventions. At Gati, the MSME segment- both formal and informal- remains a core focus for us,” he added.
He added that the National Logistics Policy (NLP) launched by the government in September 2022 with the aim of cutting the cost of logistics by half will pave the way for a comprehensive logistics ecosystem for the MSME sector.
According to Shailesh Kumar, Founder, CABT Logistics, the NLP would support the One Nation, One Market objective and provide a flexible regulatory environment. “This will ensure that we not only harness the potential of the sector in the domestic market but also in the international market. It will help create a repository of all stakeholders and build a strong platform that can cater to the overseas market as well,” he said.
Anshuman Singh, Chairman and Managing Director, Stellar Value Chain Solutions Pvt Ltd said the country is making significant progress in improving its logistics efficiency with the development of dedicated freight corridors with the rollout of PM Gati Shakti National Master Plan for building multimodal connectivity. He asserted, “For the MSMEs, the fragmented supply chains, proper warehousing and transportation infrastructure often gets in the way of achieving cost efficiency. However, with the launch of the Unified Logistics Interface Platform (ULIP), improved infrastructure, streamlined processes, and technology adoption will help MSMEs unlock the full potential of the MSME sector in India.”
Talking about the advancement of e-commerce technology and its implementation in the MSME sector, Singh said, “Technologies, especially data-driven technologies have brought in greater efficiency and transparency in supply chain management, leading to improved inventory control, route optimization, and real-time tracking. MSMEs with a progressive outlook are aggressively adopting digital technologies. In this era of data analytics, MSMEs are leveraging digital technologies to identify growth markets, and evaluate delivery performance, among others. Having said that, cost constraints pose a significant barrier. Investing in technology infrastructure, software, and skilled personnel can be financially challenging for smaller businesses with limited resources.”
The introduction of schemes like the Pradhan Mantri Mudra Yojana (PMMY) and the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has aimed to enhance credit availability for MSMEs. Collaborations with non-banking financial companies (NBFCs) and fintech platforms have also facilitated easier access to finance.
Guruprasad Bangle, Chief Technology Officer, SolutionBuggy pointed out that MSMEs are now aggressively taking measures to adopt the use of technology. “Implementation of barcodes to a large extent has reduced pilferage during logistics. It has also allowed tracking material movement and product sales from store counters to some extent. This helps in better inventory management and looks at production planning and forecasting in a more refined way. Challenges still exist in managing the loss of products in transit, pilferages etc. We are currently using a SaaS-based product that allows access to a lot of such data. But it is still very early days for us as we do not have enough data to get meaningful insights from it, but over a period of time, it will lead to good data collection leading to better tracking and forecasting,” he said.
To promote technological upgradation, the government has introduced schemes such as the Technology Upgradation Fund Scheme (TUFS) and the Digital MSME Scheme. Encouraging partnerships between MSMEs and research institutions fosters innovation and facilitates technology absorption.
