Saturday, December 31, 2011

Design … to improve manufacturing competitiveness

The importance and benefits of design can be best demonstrated through projects. Major emphasis of the design clinic scheme thus is on projects, with its over 60% fund allocated for design project support to the MSMEs. 

With the target to reach out to around 200 industry clusters, the scheme will support 400 design projects. This includes support to 300 professional design projects and 100 student design projects. Individual MSME unit or group of MSMEs can apply for the project support. Upon the approval of the project, the scheme would reimburse 60% of the design project expenses.  This includes design fees, model and prototype expenses as well as project related travel and documentation expenses. Individual MSME unit or a group of upto three units can get the financial support maximum upto Rs. 9.0 lakh, while a group of four or more units can get the maximum support of Rs. 15.0 lakh for the professional design project.

The scheme has received encouraging response from the industry and by now we have received 109 project proposals. These proposals are at various stages of their evaluation. From the 47 project proposals already approved, 6 projects have been completed and around 11 projects are in the final phase of their completion.
The scheme offers an interesting challenge to the country's design fraternity. The scheme is launched by the government of India for the country's large micro, small and medium enterprises, MSMEs as part of its National Manufacturing Competitiveness Programme, NMCP, with a specific objective to improve manufacturing competitiveness of these MSMEs.  The Design Clinic Scheme is one of the 10 schemes launched under the NMC programme and is financially supported by the ministry of MSMEs, Govt. of India.

The focus of the scheme therefore is on improving manufacturing competitiveness of MSMEs through the appropriate use of design. 

This subtle but critical difference in terms of design intervention approach to the problems/project is felt missed out by the designers and is visible in the project proposals submitted to the scheme. The proposals invariably stop at highlighting the design intervention towards developing a new product; improve the existing product in terms of its aesthetics, functionality, addition of new features etc. Over and above these benefits, each proposal is evaluated from the perspective of its potential/s and scope of design intervention to improve the manufacturing competitiveness of MSME unit’s product/ business, to increase export potential and/or its potential to reduce import substitute etc. 

Each of the proposals submitted to the scheme are evaluated at three levels. At the first level the proposal is reviewed independently by three external design experts.  At the second stage of assessment, this proposal is assessed by the Project Assessment Panel, PAP, comprising of designers, members from industry associations and from government organizations. At the final stage, the recommendations of PAP are discussed and reviewed by the Project Management and Advisory Committee, PMAC, of the scheme for its approval (details on ). 

The projects completed so far under the scheme support, have ably demonstrated the strength and capability of design to improve manufacturing competitiveness of the product/s and the businesses as a whole. While design interventions have helped improve these products from their aesthetics, ergonomics, functionality, addition of new feature etc. perspectives, these interventions have helped reduce material, weight, product volume, product floor space (foot print area), etc. Design interventions have helped optimize components as well as overall manufacturing process resulting in reduction in production cost and improved product quality. Standardization of parts and components, modular approach, ease of assembly, maintenance, optimized after sale services, etc. have been some of the added benefits of these interventions towards improved manufacturing competitiveness.  Design Interventions thus have provided holistic solutions resulting in incredible benefits and major value additions for their client MSME units to stand out from the competition. With the newly designed products now compatible for global trade, these interventions would certainly help develop strong brand value for their MSMEs.

The project proposal formats and the guidelines have been further refined to help MSMEs and designers include all the relevant and required information in their proposal/s.  The complete process of submission of the proposal as well as the information of its status will be very soon available online on the scheme website.  The scheme implementation team is constantly facilitating external experts and project assessment committee, whenever required to connect and get the necessary information/ clarifications from the MSME units and/or designer at the earliest.

Country’s large micro, small and medium enterprise sector, a crucial industry sector in the context of country’s economic and social development, demands holistic solutions to improve their manufacturing competitiveness and thereby survive and progress in the global markets of today. Design can contribute at a major scale to offer such holistic solutions and thereby help the country’s MSMEs to move up the value chain. Few of the projects completed so far have ably demonstrated this capability. I am sure, country’s design fraternity will rise to this challenge to be part of this major design movement. 

Monday, December 12, 2011

MSMEs in India

World over, the Micro Small and Medium Enterprises or MSMEs have been recognized as the backbone of the country’s economic growth. MSMEs’ role in the economic and social development of the country is now well established. In most of the economies world over, the MSMEs constitute over 90% of total enterprises. The labour and capital ratio and the overall growth in the MSMEs is normally much higher than in the larger industries. The labour intensity of the MSME sector being much higher than that of the large enterprises, MSMEs generates the highest rates of employment growth.  According to the Australian economist Chris Hall, SME sectors provide totally 70 % of employment worldwide.

 For India, a labor abundant country, MSMEs are the major source of employment generation and foreign exchange earnings.  MSMEs are the second largest source of employment after agriculture. MSMEs provide employment to about 59.7 million persons through 26.1 million enterprises. This sector contributes 8 per cent of the country’s GDP, 45 per cent of the manufactured output and 40 per cent of its exports. MSMEs in the country manufacture over 6,000 products.

Over 95 % of the country’s industries come under MSME category.  And more than 94 per cent (24.5 million) of these MSMEs are in the unregistered segment, with a large number established in the informal or unorganized sector.  From these MSMEs about 7.3 million are manufacturing enterprises while 18.8 million enterprises are engaged in rendering various services. And 54.4% of the MSMEs (14.2 million) are rural enterprises.

It is estimated that to create one job in the MSME sector, only Rs 72,000 is required as against Rs 5.5 lakh required in the large organised sector. By providing employment in the rural area, MSMEs help arrest migration from villages to cities.  The geographic distribution of the MSMEs is also more even. In view of these factors, MSMEs are important for achieving national objectives of growth with equity and inclusion.

Realizing the significance of this sector in overall growth and progress of the country, the government has taken several initiatives over the years towards strengthening this vital sector. The MSME development organization was set up in 1954 as an apex body for sustained and organized growth of MSMEs in the country. For the first time in Indian history, the government in the year 1991 announced a separate policy for the small scale sector that focuses on further promotion of the sector. The MSME development Act 2006 came in effect from 2nd October 2006.  With the objective to ensure healthy growth of this sector and to increase its competitive edge, the Government of India announced the National Manufacturing Competitiveness Programme (NMCP) during the budget speech 2005-06. Through the amendment of the Government of India (Allocation of Business) Rules, 1961, through Presidential notification dated 9th may 2007, Ministry of Agro and Rural Industries and the Ministry of Small Scale Industries were merged into the single ministry - Ministry of Micro, Small and Medium Enterprises, MSMEs.

In India, the micro, small and medium enterprises have been classified broadly into two categories; manufacturing enterprises and those engaged in providing or rendering services. As per the MSME Development Act of 2006, (India) micro, small and medium industries are defined based on their investment in plant and machinery for manufacturing enterprise, and based on their investment in equipments for enterprises providing or rendering services.

According to this act:
·         A micro enterprise is where the investment in plant and machinery does not exceed twenty five lakh rupees.
·         A small enterprise is where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees.
·          A medium enterprise is where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees.

Accordingly in the case of the enterprises engaged in providing or rendering of services,
·         A micro enterprise is where the investment in equipment does not exceed ten lakh rupees.
·         A small enterprise is where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees.
·         A medium enterprise is where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.