Digital Revolution in Indian SMEs: Bridging Gaps and Transforming Futures

I have been regularly in touch with several SMEs across different geographies of India. When I talk to them, I am amazed by the resilience of these SMEs to prevail and flourish despite several challenges that they may face in the Indian ecosystem. I recently spoke on 'Creating Efficiencies in Supply Chain through Digitization' at the SME Chamber Conference in Mumbai. The conference provided valuable insights into the future of manufacturing and the role of digital transformation in shaping the sector.

While there has been a lot of talk on how Digitization can transform the entire landscape of SMEs in India, very few have actually taken the pains to first understand what is it that SMEs in India really want? What are they lacking? What are their current challenges and Pain Points? And can we as an Ecosystem together with the Private and Public sector intervention provide solutions to these challenges faced by the SMEs today in India.

Key Challenges faced by SMEs in India today:

Most SMEs In India face key Challenges in the form of Financing & Access to Working Capital, Scaling up distribution beyond their own geography, discovering creditworthy and trusted suppliers and buyers who can offer best price, access to skilled workforce, managing the regulatory landscape. While there has been significant advancement in overcoming most of these challenges in the B2C space through introduction of E-commerce Giants as well as homegrown Startups in India, the B2B space unfortunately still remains remains largely languishing in moving past these challenges.

The Next Decade of Manufacturing

Industry 4.0 has the potential to contribute 25% to the GDP, and AI technology is expected to boost production by 40% or more. This presents a significant opportunity for SMEs to leverage advanced technologies to drive growth and innovation.

Digitization as the panacea to SME Challenge of Scaling up & Discovery

Digitization is the easiest way for SMEs to scale up their businesses across geographies. The Pan-India presence that an App or a Website can offer can increase the scale and scope of a SME business by leaps and bounds. SMEs must therefore use Digitization to transform their customer experience, increase productivity, improve supply chain, and optimize costs. Digitization, infrastructure, supply chain management, distribution, availability of skilled workforce, and information on regulation and compliance are crucial for SMEs to succeed in the digital age.

The Role of Digital Transformation

The Scale and size of a SME is crucial in determining the stage and scale of Digital journey that it must embrace. While several SMEs jump on to the bandwagon of Digitization, it is important for them to first assess whether they have achieved the right scale to take up higher investments in digitization. Without the right fundamentals to back it up, heavy investments in Digitalization can lead to significant sunk costs without much scale and efficiency especially for early stage startups. Automation, edge control, IoT, and real-time monitoring without latency are essential components of digital transformation in manufacturing. Cybersecurity is also a critical concern, as data protection is vital for businesses of all sizes.

Ensuring Buyer and Seller Creditworthiness

There have been several Service providers who offer creditworthiness scores for a nominal fee, which can help SMEs make informed decisions when it comes to business transactions. However these scores are not always to be trusted blindly. There have been instances where SMEs have lost Crores of Rupees by extending credit to entities just basis these scores. In such cases, Personal verification and the use of debt analytics can help solve the challenge of ensuring buyer and seller creditworthiness.

There have been several startups lately in the Indian B2B Ecommerce landscape who have addressed some of these challenges faced by Indian SMEs. One such Startup has been L&T SuFin which provides an integrated solution to the problems of Discovery, Creditworthiness and Digital Scaleup through its App and E-commerce Platform website. Such Startups with the backing of 77 year old legacy large industrial conglomerates such as the L&T Group can definitely enhance credibility and trustworthiness in the minds of B2B Customers & SEMs in India and slowly effect a change in behavior towards increased adoption of Digitization in business operations.

By leveraging these insights, SMEs can navigate the evolving landscape of manufacturing and seize the opportunities that the digital age presents.