msme linkages 2013_survey results

© 2013 Deloitte Touche Tohmatsu India Private Limited

CII Deloitte MSME Survey Results

Deloitte Touche Tohmatsu India Pvt. Ltd.

August, 2013

Draft for Discussion


Background to the study

• MSME being back bone of industrial development, Gujarat has always accorded high priority to this

sector. Before inception of MSMED Act 2006 there were 312752 SSI units registered generating

489216 employment in Gujarat. A total of 140587 MSME enterprises were acknowledged during

1/10/2006 to 31/12/2012. Thus the total MSME stood at 453339 on 31/12/2012 providing employment

to 2504856 people. The Vibrant Gujarat 2011 Summit saw over 54% MoUs being signed by SMEs. VG

2013 saw an over encouraging response of 72.72% of the MoUs signed by SMEs.

• The overall growth rate of the manufacturing sector in India being much below its potential, the

government of India (GoI) has laid emphasis on the growth of manufacturing sector. The national

manufacturing policy 2011 aims at increasing the present share of manufacturing sector in GDP from

18% to 25% by 2025

• Manufacturing sector in Gujarat contributes to 27.6% of GSDP in Gujarat with a CAGR of 23% in last

two years. There is a need for quantum jump by (a) Creating more employment (b) Development of

entire value chain of the sector (c) Focusing on value addition in product development/process (d)

Development of knowledge base in related sectors (e) Sustainable development. Therefore in the

budget speech of the year 2012-13, government announced its attention to attain the target of 32%

contribution by manufacturing sector in GSDP by 2017 by introducing specific interventions in the sub

sector of technical textiles, food and agro business park, auto and components, speciality and fine

chemicals, solar and wind equipments manufacturing and electronic system design and manufacturing

(ESDM).

(Source: Socio-Economic Review 2012-13, Gujarat State)

2



• Supply chain being critical to sustainable improvement in manufacturing competitiveness and achieving

the target of 32% contribution by manufacturing sector in GSDP by year 2017, CII chapter of Gujarat

commissioned the study to assess the status of supply chain in Gujarat in the MSME sector

• Main objective of study was to assess –

1. Bottlenecks which MSMEs in Gujarat are experiencing in exploiting their full potentials. How can

larger enterprise help them removing these bottlenecks?

2. The strength of MSMEs which larger enterprise can leverage to add value to their supply chain.

3. Areas of improvements for MSMEs to be globally competitive.

• Engineering, Chemical, Food Processing, Auto and logistics were identified as sectors for the outreach

based on the contribution to manufacturing GDP of Gujarat by CII

• There were 75+ number of companies that were reached out, through email or personal contact, to

understand the challenges for MSME players operating in Gujarat out of which 25 companies, including

MSMEs, responded.

3



• For understanding the challenges and getting feedbacks, Deloitte and CII representatives met the

concerned officials of the companies. Feedbacks were compiled in structured questionnaire format.

Questionnaire was structured to assess

1. Supply chain strategies and issues

2. Value chain issues

3. Infrastructure and logistic environment

4. Technology support

• This study results envelops the outcome of the analysis based on the responses received from the

various participants.

4


Executive Summary – MSME Survey Result

Respondent Profile

• Significant respondents are from the Engineering sector and have annual turnover of > 100 Crs

Supply Chain Strategies and Issues - Driving revenue growth

• The companies consider economic turnaround, entering new geographies, developing new market

channels and new product launches as key areas for revenue growth

Supply Chain Strategies and Issues - People for supply chain strategies

• 60% of MSME respondents saying, it is not applicable in their context.

• Given the profile of companies amongst respondents cover entire range of sales turnover of 25Cr to

>100Cr, suggests that the “importance supply chain” in the context of organizations competitiveness

and growth is not seen

• This reflects in form of commitment amongst the players in MSME sector in Gujarat having this function

represented marginally

Supply Chain Strategies and Issues - Priorities of supply chain strategies

• The companies feel that the sourcing effectiveness, manufacturing productivity, product quality, cost

effectiveness, customer service as the key priorities of their supply chain strategies

• Considering the priorities of the companies, it appears that most of them are into manufacturing make-

to-print parts and seem to be struggling with the basics of Quality, Cost and Delivery in the context of

major supply chain issues

5



Value chain Issues - Geographic market

• The companies would like to expand significantly in the exports and domestic markets, however they

may find it difficult to expand given that these organizations are struggling at the basic level of supply

chain challenges

Value chain Issues - Collaboration with customers

• Companies recognize significant gains through collaboration with customers in areas of quality

improvement and inventory management in line with the extent of collaboration

• The companies do not perceive any gain in benefits in the form of collaboration with customer on the

marketing and planning

• Benefits seem to have a high correlation to the extent of collaboration with customers. Either customers

have not focused in areas other than Quality & Delivery or the programs in other areas don’t seem to be

effective

Value chain Issues - Geographic dispersion of suppliers

• The western region has strong presence of suppliers with an average of 67% of the suppliers, however,

the average contribution by value is ~56% implying that value addition by suppliers based out of the

western region is lower than other regions

• The next highest contribution is from imports, followed by suppliers based in the North region

6



Value chain Issues - Collaboration with key suppliers

• The companies have not been able to gain the benefits from collaboration with suppliers on the

marketing, inventory and cost reduction

• Companies seem to percolate similar quality of collaboration to their suppliers as they receive from their

customers

• In the above context, customers role in developing the supply chain in Gujarat is of paramount

importance

Value chain Issues - Barriers to achieving supply chain flexibility

• The companies find the forecast error, supplier quality, conflicting objectives between supplier and

company major barriers to supply chain flexibility

Infrastructure and Logistics environment - Warehouse details

• Majority of the companies with warehouses have less than 4 warehouses with leasing being the most

common ownership model

• Of all the warehouses ~50% are in the 500 – 1000 Sq. Ft range

• Forklifts, Cranes and Racking systems are the most commonly used material handling system

Infrastructure and Logistics environment - People and training

• Majority of the companies have less than 5 employees in the Supply chain

• The average training time provided to employees is spread across the range from less than 10 hours to

more than 40 Hrs

7



Infrastructure and Logistics environment – Logistics performance

• Pilferage and transit losses are not a major source of loss being primarily less than 1%

• The total inventory days is spread across <15 to > 60 days with logistics cost being less than 6% for

most of the companies.

• Only 25% of the companies have total inventory less than 15days, while suppliers in west region are

responsible for (56%) and supplier based in ROI (23%) and about (20%) are overseas suppliers in

value terms and considering lead times of 7days, 10days North, 15 days South, 20 days east and 45

days for Imports, companies should be able to achieve Total inventory of 15~25 days.

• Higher inventory days is reflective lower material flow velocity and higher cash conversion cycle which

could be essentially related to planning process and its maturity within MSME sector

Infrastructure and Logistics environment - Level of support

• MSME sector seem to be satisfied with the logistics infrastructure available to them in Gujarat with most

of the respondents scoring 4 and 5

• However, in tax-benefits about 50% companies seem to have got benefit while similar number feel

otherwise. It may be important to create awareness amongst MSMEs of the benefits available to them,

so that they can improve their overall competitiveness

• There seems to be a major issue around efficiency factors like licensing and documentation support

and faster port processing time where process efficiencies and productivity pose a challenge

• Further, warehousing cost are perceived to be high with around >50% of the respondents scoring 3 0r

less. In this area interventions from Government in terms of land costs could help promote overall

material movement velocity

8



Infrastructure and Logistics environment - Performance improvement

• The companies do not perceive any improvement in the overall logistics environment in terms of

efficiency except to an extent in case of inventory optimization. However, there seems to be good

potential to further optimize inventory for around 50% of the base assessed

• The focus of organizations and logistics companies has been around cost optimization, however,

degree of implementation efforts doesn’t seem to align with perceived gains in terms of cost. There

appears a need to revisit the programs being implemented by organizations, starting from gaining

perspectives through Voice-of-Customers (VOC)

Infrastructure and Logistics environment - factors to logistics and warehouse efficiency

• Most of the respondents do not know the major factors impacting the logistics and warehousing

efficiencies in Gujarat and while others seem to find all the factors as important

• There is a need to do a more comprehensive diagnostics study involving major logistics companies,

customers and supplier participants in each of the sector specific value chains to identify key issues to

focus in immediate, medium and long-term basis and draw-up a roadmap

9



Technology Support

• Most of the companies seem to have some sort of ERP, however advanced IT tools don’t seem to be

popular amongst MSME sector. However, those companies that have implemented IT solutions seem to

have gained from them

• Companies seem to also be positive on the IT systems and therefore, there are a few who are keen to

take it forward

• There appears a need to promote awareness on the IT solutions for MSME and their potential benefits

to ensure a larger set of companies show inclination towards IT systems

10


Survey Respondent Overview

11


5

3

5

12

0

2

4

6

8

10

12

14

<25 Crs 25 to 50 Crs 51 to 75 Crs >100 Crs

Respondent Profile

12

Industry Sector Profile Company Size - Revenue No of Employees

<100 32%

100-500 36%

500-1000 8%

>1000 12%

NA 12%

Engineering

72%

Chemical

4%

Food Processi

ng 12%

Auto 8%

Logistic 4%

No o

f C

om

panyi

es

• Significant respondents are from the Engineering sector and have annual turnover of > 100 Crs

Sr, No. Sectors # of companies Sales Turnover range

(INR Cr)

Employee range

1 Engineering 18 < 25 – >100 <100 - >1000

2 Food Processing 3 51 - > 100 <100 – 1000

3 Auto 2 >100 >1000*

4 Logistics 1 < 25 <100

5 Chemical 1 51 – 75 <100

* - Employee data not available for 1 company in Auto sector


Survey Findings

13


Supply Chain Strategies and Issues - Driving revenue growth

14

0 0 0 1

0

7 7

0 0

2

4

2

4 5

2

6

3 3 2

3 4

14

9 8

9

13

2 2

8

10 11

8 8 7

2 1

0 1

0 0

2

5

Industry marketgrowth rate

Economicturnaround

Entering newgeographic

markets

Developing newmarket channels

New products &services launch

Jointventures/strategic

alliances

Merger/acquisition

1 2 3 4 5 NAScale : 1 = not important, 5 = highly important N/A = not applicable

• The companies consider economic turnaround, entering new geographies, developing new market channels and new

product launches as key areas for revenue growth


Supply Chain Strategies and Issues - People for supply chain strategies

15

Do you have a single executive who is

responsible for end-to-end supply chain strategy

in your organization?

• 60% of MSME respondents saying, it is not applicable in their context.

• Given the profile of companies amongst respondents cover entire range of sales turnover of 25Cr to >100Cr, suggests

that the “importance supply chain” in the context of organizations competitiveness and growth is not seen

• This reflects in form of commitment amongst the players in MSME sector in Gujarat having this function represented

marginally

Yes 40%

No 60%

6

4

1

15

0 5 10 15 20

CEO or executive leader ofthe Business Unit

CxO or member of the seniorexecutive management team

of the Business Unit

Other leaders or manager ofthe Business Unit

Not Applicable - Don’t know

Management level has responsibility for the

supply chain strategy?


Supply Chain Strategies and Issues - Priorities of supply chain strategies

16

• The companies feel that the sourcing effectiveness, manufacturing productivity, product quality, cost effectiveness,

customer service as the key priorities of their supply chain strategies

• Considering the priorities of the companies, it appears that most of them are into manufacturing make-to-print parts and

seem to be struggling with the basics of Quality, Cost and Delivery in the context of major supply chain issues

3 4

3 2

6

1 2 2

3

1

9

7

5 4

10

8 9 9

6

10

8

12

15

18

7

15

13

10

15

11

2 1

2 1

2 1 1

2 1

2

0

2

4

6

8

10

12

14

16

18

20

1 2 3 4 5 NA

Scale : 1 = not important, 5 = highly important N/A = not applicable


Value chain Issues - Geographic market

17

• The companies would like to expand significantly in the exports and domestic markets, however they may find it

difficult to expand given that these organizations are struggling at the basic level of supply chain challenges

0

2 2

0 0 1

3

1 1 0

7

3

5

3 2

7

9 9 9

5 6

4 4

8

15

0

2

4

6

8

10

12

14

16

North East South West Exports

1 2 3 4 5

Scale : 1 = no presence/no plan, 2 = enter market, 3 = maintain current presence, 4 = expand presence, 5 = significantly expand presence


Value chain Issues - Collaboration with customers

18

• Companies recognize significant gains through collaboration with customers in areas of quality improvement and

inventory management inline with the extent of collaboration

• The companies do not perceive any gain in benefits in the form of collaboration with customer on the marketing and

planning

• Benefits seem to have a high correlation to the extent of collaboration with customers. Either customers have not

focused in areas other than Quality & Delivery or the programs in other areas don’t seem to be effective

1 2

3 2

1 1 2

0 0 1 1

0 1

2 0

1

4

7

2 4 4

7 7

3

13

7

10

4

8 7

5 7

2 4 4

11

7

4 6

10

5 4

5 4 4 4

5 4

02468

101214

Strategicplanning

Forecasting anddemandplanning

Marketing andpromotionplanning

Productionplanning

Inventorymanagement &replenishment

Transportationplanning

Cost reduction Qualityimprovement

1 2 3 4 5 NA Scale : 1 = Nil , 5 = High N/A = not applicable

0

2

4 3

1

3 2

1 0

1 0 0

3 2

1 0

4

6

4 5

1

3 4

2

12

8 7

5

9 9

6 7

3 3 4

8

6

3

6

11

6 5

6

4 5 5

6

4

0

2

4

6

8

10

12

14

Strategicplanning



Productionplanning




1 2 3 4 5 NA

Extent of collaboration

Benefits gained

Scale : 1 = not gained, 5 = Significant gain N/A = not applicable


Value chain Issues - Geographic dispersion of suppliers

19

• The western region has strong presence of suppliers with an average of 67% of the suppliers, however, the average

contribution by value is ~56% implying that value addition by suppliers based out of the western region is lower than

other regions

• The next highest contribution is from imports, followed by suppliers based in the North region

Mean of geographic dispersion of suppliers - # of suppliers Mean of geographic dispersion of suppliers - % share of value

North, 11%

East, 1%

South, 7%

West, 67%

Imports, 14%

North East South West Imports

North, 15%

East, 2%

South, 8%

West, 56%

Imports, 19%

North East South West Imports


Value chain Issues - Collaboration with key suppliers

20

• The companies have not been able to gain the benefits from collaboration with suppliers on the marketing, inventory and

cost reduction

• Companies seem to percolate similar quality of collaboration to their suppliers as they receive from their customers

• In the above context, customers role in developing the supply chain in Gujarat is of paramount importance

3 1

4 2 2

1 2

1 2

1 1 0

1 2 2

0 2

5

2

5 4

6

2 4

7

3

12

7

4

9 8

4

7

11

2

7

10

3

7

12

4 4 4 4 4 4 4 4

0

5

10

15

Strategicplanning



Productionplanning




1 2 3 4 5 NA

Extent of collaboration

Benefits gained

3 3 4

3 3

8

4 3

7 5

7 8 8

6 6

3

7

11

3 5

7

3

7

12

5 4

5 4

5 4

5 4

0

5

10

15

Strategicplanning



Productionplanning




1 2 3 4 5 NA Scale : 1 = not gained, 5 = Significant gain N/A = not applicable

Scale : 1 = Nil , 5 = High N/A = not applicable


Value chain Issues - Barriers to achieving supply chain flexibility

21

• The companies find the forecast error, supplier quality, conflicting objectives between supplier and company major

barriers to supply chain flexibility

10

1

4

5

3

4

5 5

4

3

6

5 5 5 5 5

3

8

5

4

7

6

4 4

7

10

3

2

6

3

5

8

2

8

3

5

6 6

4 4

5

1

7

6

1 1

4

3 3

7

4

3

4

7

6

4

2

3

1

6

3

2

3

2

1 1

4

3 3

1

2

3

2

4 4 4 4

7

5 5

6

0

2

4

6

8

10

12

1 2 3 4 5 NAScale : 1 = not a barrier, 5 = major barrier, N/A = not applicable/don't know


Infrastructure and Logistics environment - Warehouse details

22

• Majority of the companies with warehouses have less than 4 warehouses with leasing being the most common

ownership model

• Of all the warehouses ~50% are in the 500 – 1000 Sq. Ft range

• Forklifts, Cranes and Racking systems are the most commonly used material handling system

0 2 4 6 8 10 12

0-4

4 to 8

16 to 25

>25

NA

No of warehouses

Owned 36%

Leased 43%

CFA's 21%

Owned Leased CFA's

Warehouses ownership model

19%

49%

11%

5%

16%

0-500 500-1000 1001-5000 5001-10000 >10000

Warehouses – Area of warehouse (Sq. Ft)

13

14

18

4

4

0 5 10 15 20

Racking systems

Cranes

Forklifts

Automated racking systems

Gravity feeders

Material Handling Systems Utilized


Infrastructure and Logistics environment - People and training

23

• Majority of the companies have less than 5 employees in the Supply chain

• The average training time provided to employees is spread across the range from less than 10 hours to more than 40 Hrs

No of people in supply chain Avg training time

0 5 10 15

0 to 5

6 to 15

16 to 30

31 to 50

> 50

0 2 4 6 8

0 to 10 Hrs

11 to 20 Hrs

21 to 30 Hrs

31 to 40 Hrs

>40


Infrastructure and Logistics environment – Logistics performance

24

• Pilferage and transit losses are not a major source of loss being primarily less than 1%

• The total inventory days is spread across <15 to > 60 days with logistics cost being less than 6% for most of the

companies.

• Only 25% of the companies have total inventory less than 15days, while suppliers in west region are responsible for

(56%) and supplier based in ROI (23%) and about (20%) are overseas suppliers in value terms and considering lead

times of 7days, 10days North, 15 days South, 20 days east and 45 days for Imports, companies should be able to

achieve Total inventory of 15~25 days.

• Higher inventory days is reflective lower material flow velocity and higher cash conversion cycle which could be

essentially related to planning process and its maturity within MSME sector

Transit damages

12

11

1

0

0

0 5 10 15

0 to 1%

1% to 2%

2% to 4%

4% to 6%

> 6%

Pilferage losses

0 5 10 15 20 25

0 to 1%

1% to 2%

2% to 4%

4% to 6%

> 6%

Total inventory days Logistics cost as a % of sales

0 2 4 6 8 10

0 to 15

16 to 30

31 to 45

46 to 60

>60

0 2 4 6 8 10

0% to 2%

3% to 4%

5% to 6%

6% to 10%

> 10%


Infrastructure and Logistics environment - Level of support

25

• MSME sector seem to be satisfied with the logistics infrastructure available to them in Gujarat with most of the

respondents scoring 4 and 5

• However, in tax-benefits about 50% companies seem to have got benefit while similar number feel otherwise. It may

be important to create awareness amongst MSMEs of the benefits available to them, so that they can improve their

overall competitiveness

• There seems to be a major issue around efficiency factors like licensing and documentation support and faster port

processing time where process efficiencies and productivity pose a challenge

• Further, warehousing cost are perceived to be high with around >50% of the respondents scoring 3 0r less. In this

area interventions from Government in terms of land costs could help promote overall material movement velocity

1

4 4 3 3

2 3

1

3 4 4 4 4

6 6

2

5 6

9 8

5

8

4

10

15

4 5 5

12

6

4

9

1 2

3 3

1

3

6

2

0

2

4

6

8

10

12

14

16

1 2 3 4 5 NAScale : 1 = none, 5 = high N/A = not applicable


Infrastructure and Logistics environment - Performance improvement

26

• The companies do not perceive any improvement in the overall logistics environment in terms of efficiency except to

an extent in case of inventory optimization. However, there seems to be good potential to further optimize inventory for

around 50% of the base assessed

• The focus of organizations and logistics companies has been around cost optimization, however, degree of

implementation efforts doesn’t seem to align with perceived gains in terms of cost. There appears a need to revisit the

programs being implemented by organizations, starting from gaining perspectives through Voice-of-Customers (VOC)

11

5

2

9

0

2

0

4 4

2

5

3 4

9 10

4 3

6 7

2 3

1 1

3

0

2

4

6

8

10

12

Warehouse network optimization Logistics cost optimization Inventory optimization Vehicle turn-around timereduction

1 2 3 4 5 NA

Degree of implementation

2

5 5

2

5 6

13

6

2

6

2 1

13

6

3

10

0

5

10

15

Warehouse network optimization Logistics cost optimization Inventory optimization Vehicle turn-around timereduction

1 2 3 4 5 NA

Benefits gained

Scale : = no implementation, 3 = some implementation, 5 = major implementation

Scale : = no implementation, 3 = some implementation, 5 = major implementation


Infrastructure and Logistics environment - factors to logistics and warehouse efficiency

27

• Most of the respondents do not know the major factors impacting the logistics and warehousing efficiencies in Gujarat

and while others seem to find all the factors as important

• There is a need to do a more comprehensive diagnostics study involving major logistics companies, customers and

supplier participants in each of the sector specific value chains to identify key issues to focus in immediate, medium

and long-term basis and draw-up a roadmap

0

2

4

6

8

10

12

14

16

18

High loadingand unloading

time

High pickingand packing

time

On-timevehicle

availability

Lack ofwarehouseautomation

Highwarehouseautomation

cost

Transitdamages

Pilferages inwarehouse

Pilferage intransit

High inventorylevels

1 2 3 4 5 NA Scale : 1 = not a barrier, 5 = major barrier, N/A = not applicable/don't know


5 3 5 3 4 3

11 14 12 14 13 13

9 8 8 8 8 8

0

10

20

Enterprise resourceplanning system (ERP)

Forecasting/demandplanning software

Advanced planning &scheduling (APS)

Warehousemanagement system

(WMS)

Transportationmanagement system

(TMS)

Customer relationshipmanagement (CRM)

Yes No NA May be

8 4 4 3 1 3

7

17 14 18 17 17

0

10

20

Enterprise resourceplanning system

(ERP)




(WMS)


(TMS)


1 2 3 4 5 NA

Technology Support

28

3

13 10 14 14 12

2 0

2 1 2 1 1 0 2

0 1 2 4 4 4 3 4 4

12

5 4 4 1

3 3 3 3 3 3 3

0

5

10

15

Enterprise resourceplanning system

(ERP)




(WMS)


(TMS)


1 2 3 4 5 NA

Degree of implementation

Benefits achieved

Plan to implement Scale : 1 = not gained, 5 = Significant gain N/A = not applicable

Scale : 1 = Nil , 5 = High N/A = not applicable

• Most of the companies seem to have some sort of ERP, however advanced IT tools don’t seem to be popular amongst

MSME sector. However, those companies that have implemented IT solutions seem to have gained from them

• Companies seem to also be positive on the IT systems and therefore, there are a few who are keen to take it forward

• There appears a need to promote awareness on the IT solutions for MSME and their potential benefits to ensure a

larger set of companies show inclination towards IT systems

msme linkages 2013_survey results

Documents

manufacturing gdp of

growth of manufacturing

manufacturing competitiveness

manufacturing esdm

gujarat state

vibrant gujarat

study msme

sector c