Automation spurs growth for manufacturing MSMEs

Micro, small and medium enterprises (MSMEs) with automated manufacturing facilities have a distinct edge over their semi-automated counterparts which have a higher share of employee-oriented operations.

CRISIL analysed 3,200 MSMEs in the manufacturing sector during the period 2012-13 to 2014-15. The MSMEs with automated facilities clocked a compound annual growth rate (CAGR) of 18 per cent, compared with 12 per cent for those with semi-automated facilities.

In 2014-15, entities with automated operations had an employee cost of only nine per cent of the total manufacturing cost. For semi-automated MSMEs, this cost was 14 per cent. The relative cost-efficiency enabled the automated entities to deliver better-quality products and thereby generate higher revenues. Even offsetting a part of the efficiency against the initial investment towards set-up and installation cost, the operating margin was similar (eight to nine per cent) for both groups.

CRISIL believes automation helps improve productivity by reducing production time, enhancing volumes and offering consistent product quality. This in turn helps sustain competitive advantage in the market.