207 week ago — 11 min read
In my previous articles we looked at how adopting technology can help not only SME businesses but also the economy and how technology can be an enabler for SMEs.
In this third article in the series on SMEs, we look at adoption of a technology platform such as an ERP (Enterprise Resource Planning) solution and how, if at all, it may act as a first step towards more efficiency, profitability and growth in this sector.
ERP in simple terms is a business management system which provides an integrated solution by streamlining the whole business activities by using a common pool of data.
India has 6.33 crore MSMEs out of which 6.30 crore—99.4 per cent are micro-enterprises. The number of registered MSMEs in FY20 has increased by 18.49 per cent to 25.13 lakh units from 21.21 lakh in FY19, according to government data.
SMEs are both an engine of job creation and a significant factor in job destruction. For example, EU research found that as few as 65% of firms that started trading in 2014 survived beyond five years.
But in spite of the huge number in this sector, growth in the SME sector has been mostly below average.
It is understandable that SMEs are particularly affected by market turbulence and that their position is clearly unfavorable in the newly created world economic circumstances. SME problems are reflected in reduced demand, difficult access to markets in India and abroad particularly capital markets, lack of availability of quality manpower and technology and sometimes lack of well-defined processes and systems within the entity.
Technology is driving growth and more SMEs are now open to adopting ERP.
Also read: Implementing ERP is no longer an ‘if’ but ‘when’
Manufacturing SMEs are now looking at adopting technologies that will help them scale their business and give them a competitive edge. While a significant number of them are still at a basic technology adoption level, others are fast moving to more mature levels and are welcoming new age technologies.
Along with tremendous growth opportunities in this segment, it has become a big challenge to grow, considering the competition in this segment is now not only from domestic companies but from companies all over the world. This is especially true of SME companies in the third world and developing economies. It has now become imperative for the SME owner to be on the lookout for newer opportunities in the emerging markets.
Let us start, by listing down, few business challenges being faced by this sector. Most of the SME owners we have met are bogged down by almost similar problems, that of retaining existing customers, acquiring new customers, expanding their reach to cover a wider spectrum of geographies, on time deliveries, keeping track of inventories, man management and cash management, to name a few.
One of the key drivers of business growth in the SME is the level of IT usage as an enabler of well-defined business processes.
In this article we will try to cover some challenges and benefits of upcoming technologies like ERP for the SME.
Let us start by defining ERP in simple terms as a business management system which provides an integrated solution by streamlining the whole business activities by using a common pool of data. According to a study conducted by our company, the majority of the SME, especially in the manufacturing sector are still wary of using ERP as an enabler of their business. ERP implementation is regarded as complicated and cumbersome, difficult to integrate in the existing systems and, mostly exceeds the initial estimated cost. This also results in time overruns many times defeating the primary purpose.
Most of the SME owners bemoan:
The ERP vendors on the other hand complain of cost and time constraints by the customer resulting in such shoddy work at times.
SMEs need to adopt a proactive approach towards ERP and consider it as a business transformation solution rather than a mere IT solution.
Some of the advantages to be considered include:
Also read: On-Premise ERP vs Cloud ERP
Let us list down some challenges being faced by the SME for a successful implementation of the ERP and then suggest some crucial win criteria for this.
Also read: ERP evaluation tips: Questions you should be asking
In India, SMEs are the backbone of the economy and are today faced with global competition. Therefore, it becomes imperative for them to look for means of responding to the dynamic markets. ERP systems have become the most common IT strategy for most large companies. SMEs too are moving towards ERP systems. They need to adopt a proactive approach towards ERP and consider it as a business transformation solution rather than a mere IT solution.
Also read: One small step by the SME owner…a giant leap for the economy
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Image source: shutterstock.com
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.
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Sameer MathurSM Consulting (www.smconsulting.in) is a New Delhi based Business and Technology Advisory. We guide our customers on their journey towards adopting Technologies to achieve their...
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