The Indian MSME sector is the backbone of India’s economic structure and has unremittingly acted as the pillar for the Indian economy, providing it resilience to ward off global economic shocks and adversities. MSME exports have always put the Indian economy in the forefront. There is a shift in focus toward technology-enabled tools and state-of-the-art smart logistics to ensure faster last-mile deliveries. Freightwalla handholds startups and MSMEs exporters to develop an orientation toward smart logistics.
Sanjay Bhatia, Founder, and CEO, Freightwalla, captures the growth journey of MSMEs and also analyses the issues encountered by small businesses in current times. The interview also encapsulates how a strong supply chain network can aid MSMEs and push them for better efficiency and growth in times to come.
Q1. Growth of MSMEs in India
India's micro, small, and medium enterprises sector is second to China's and significantly affects the nation's socio-economic growth. India has over 63 million MSMEs, making it the second largest employment generator employing 11 crore people. MSMEs contribute 29 percent of India's GDP from national and cross-border trades.
Indian MSMEs have played a substantial role in helping India achieve a record-breaking $400 billion in exports by contributing over 50 percent. As India aspires to become a 5 trillion dollar economy, there has been an increased focus on MSMEs and their growth.
During the past two years, Covid has proven to be a turning point for MSMEs. The lockdown caused numerous businesses to deal with low production and efficiency, constrained credit lines, a labour issue, unclear demand, etc. The MSME sector has risen to the challenges and resumed its upward trajectory.
Some obstacles slow the growth of MSMEs – low digital adoption, poor infrastructure, rising operating cost, lack of innovation, and many others. Out of six crore MSMEs, only about 1.5 lakh do exports, which amounts to less than 1 percent. Last mile technology sophistication, infrastructural development, training the rural MSMEs on optimizing their businesses, moving beyond the domestic market, and enticing taxation subsidies on exports would help India realize its $1 trillion export aim and continue to be a significant contributor to the country's economy.
Q2. What is the role of Supply Chain Finance in Fuelling MSME Growth in India?
MSMEs have always faced a lack of access to easy and timely credit mainly due to the legacy structure of the Indian Banking System, lack of collateral, credit history, etc. Over 70 percent of MSMEs require funds in the form of working capital. The introduction of Supply Chain Finance has facilitated a nurturing and conducive environment for the growth of Indian MSMEs and brought them onto the world stage.
Through supply chain financing(SCF), MSMEs can access capital more efficiently, reducing their reliance on alternative funding sources. It enables them to make payments and manage their immediate working capital needs. SCF is a format that provides regular and continuous access to finance for all needs. It is cheaper than private lenders.
Once the SCF line is formed, the money demand might be satisfied in a matter of hours which can be invested in expanding operations, replenishing stocks, or purchasing new raw materials. Supply chain finance is centred on monthly invoicing and helps MSMEs keep enough cash to continuously meet their working capital needs.
Various shipping and logistics companies offer supply-chain financing to aid their target groups in exporting goods.
Q3. In what ways a more robust supply-chain network can aid MSMEs?
An efficient and robust supply chain is underrated but critical for business optimization. An adequate supply chain can help increase the competency and productivity of MSMEs already short on resources.
A robust supply chain network can aid businesses in better inventory turnaround, optimizing resources, and bringing speed and agility to the overall system. Recently, businesses of all shapes and sizes have been affected by the pandemic, making the role of a robust supply chain network crucial. Better technology has allowed greater transparency and helped businesses improve automation. For instance, warehouse bots, drone deliveries, and other cutting-edge supply chain automation technologies are crucial to assuring customer satisfaction, resource optimization, waste elimination, and developing a sustainable and more vital network.
Tricks of how Supply chain Optimisation can help the business grow
Q4. In terms of the supply chain, what is in store for MSMEs in the supply chain in upcoming years?
The industry is assured to witness a rise in the use of advanced technologies like AI and ML for various supply chain operations, including route optimization, real-time tracking of shipments, performance forecasting, warehouse management, or live temperature monitoring of cargo.
We will also see a rise in the use of IoT to monitor the location and status of shipped cargo. Advance technology like IoT is precious when used to track the journey and condition of perishable cargo.
Blockchain technology enables digital storage and sharing of all necessary shipping documents in a decentralized and immutable manner, which prevents data manipulation.
Q5. How will the MSME industry benefit from a futuristic mindset and effective use of digital technologies?
MSMEs have realized the importance of building a responsive and resilient supply chain by adopting technology to better plan their logistics needs and address their blind spots. While AI can play a crucial role in optimizing logistics operations, ensuring cost reduction in the wake of transport inflation, ML can predict congestion at ports, helping businesses combat shipment delays. Pharma products, perishable foods, and several other time-sensitive and high-value commodities are its biggest gainers. Data science and analytics help MSMEs analyse the data and make informed decisions that optimize their entire supply chain operations, increasing the productivity and efficiency of the company.
Q6. What is the Impact of Digital Freight forwarding and how it has revived ailing small businesses in the last two years?
The freight forwarding industry has traditionally been very offline and manual; hence have significant ambiguity, higher costs, and lacks transparency and accurate forecasts. However, with the introduction of digital freight forwarders, the EXIM dynamics of India are changing rapidly.
By introducing advanced tech at every step, from planning and booking to real-time shipment tracking and accurate ETA, digital freight forwarders are changing the logistics game as we know it.
They offer guaranteed capacity, pricing stability, invoice simplification, real-time tracking, and data-driven insights to exporters, aiding them in protecting their shipments and making more intelligent business decisions transparent and cost-effectively.