Mother units take their vendors in hand

The growing stature of Indian corporate players in the global market has brought home to India Inc the need for the modernisation of small and medium enterprises (SMEs).

SMEs, known as the backbone of Indian industry, have recently got help from their large customers (original equipment manufacturers or OEMs) in restructuring their products and processes.

This is borne out by the success of the Confederation of Indian Industry’s (CII) initiative on cluster development. CII’s L M Thapar Centre for Competitiveness, which was conceptualised in 2004, has received a spectacular response in the last few months in its efforts to increase the competitiveness of SMEs in terms of quality, productivity, cost, delivery standards, shop-floor safety and employee morale.

“We provide support to two kinds of clusters: OEM clusters (suppliers of large groups) and heterogeneous clusters (different units located in geographical proximity). In the beginning the heterogeneous clusters outnumbered the OEM clusters. But in the past few months the trend has reversed,” said Harinder Jeet Singh, who heads the LM Thapar Centre for Excellence.

He said, “The large corporates, more so in the automobile sector, have evinced incredible interest in upgrading their vendors. Market leaders like Tata, Mahindra & Mahindra, Bosch, Hero Group, Godrej and Avon Cycles have sought our guidance in improving the output of small and medium units attached to them.”

Singh added the downturn in the economy had prompted inquiries at the Thapar Centre because manufacturers were inclined to cut costs. But now, bullish sentiment has driven the innovation efforts of SMEs, which are preparing to meet the growing demand.

Singh said the centre had received inquiries from Ranbaxy, Proctor & Gamble, Luminous and Cummins for the training of their employees. Ashok Leyland and Godrej Consumer Durables were also in various stages of discussion to improve the efficiency of their suppliers.

The cluster programme has three components: training, review meetings and handholding visits. It includes four kinds of interventions — manufacturing excellence, energy efficiency, cost management and human resource development.

Consultation charges of Rs2-3 lakh in quarterly installments are paid by participants. Large companies generally contribute some part of the consultation fee for their vendors.

Investment by participants, Singh said, helps them to increase returns by five to six times. Quoting the example of the Jalandhar hand tool industry, he said that by paying Rs 2 lakh per unit, each unit saved Rs 1 crore per year. This programme had 11 members, who collectively saved about Rs 11 crore in a year, he said.

The BEE (Bureau of Energy Efficiency) has also tied up with CII to provide training, proposals for energy efficiency and audit to 70 SMEs in the business of foundries, oil mills and limestone.

CII has a team of 26 technically qualified councillors at six locations and plans to increase the head count by 50 per cent every year.

A National Cluster Summit is to be organised in New Delhi in November, in collaboration with the Automotive Component Manufacturers Association (Acma), United Nations Industrial Development Organisation (Unido) and National Institution for Quality and Reliability (NIQR), to discuss issues pertaining to the performance of SMEs and to find means for improvement.