The next decade will require SMEs to partner, even piggyback, on companies that offer robust, proven, and cutting-edge digitalisation solutions.

The Make in India initiative aims to boost the contribution of the manufacturing sector from 15% to 25% of GDP, by 2022. While the market is buoyant and some changes are visible, it seems we will take much longer than anticipated to get the desired results. If and when this growth happens, there will be two factors driving it. First, the local demand and then the capex driven by FDI. In order to support this growth, India will need an ecosystem comprising tier 1, tier 2, as well as tier 3 suppliers, with a high level of automation flexibility, and quality focus. Currently, India is wooing MNCs willing to manufacture in India. However, if the local ecosystem is not ready to support these companies, they will be forced to bring their sub-companies to India. This can take away opportunities from local manufacturers. It is only through digitalisation that Indian SMEs can build the competitive edge, be on the high value chain, and take on their foreign counterparts. The next decade of manufacturing will focus on cognitive solutions that infuse intelligence into all processes—from a factory’s floor to the finished product. This will bring into existence factories that will co-ordinate on their own to meet deadlines, optimise throughput, utilise capacity, and enhance product quality.

The factories of future or ‘smart factories’ will move from automation to autonomy, leading to greater inter-connectivity between machines, physical systems and humans in real time via Internet of Things (IoT). The biggest strengths of a smart factory will be its shop floor connectivity, advanced robotics, flexible automation, virtual and augmented reality systems, and efficient energy management. Globally, the standards for the general manufacturing sector are driven by the automotive industry. In India as well, the automotive ecosystem has developed tremendously over the last couple of decades. Many manufacturers and suppliers in the country employ a large degree of digitalisation. However, the problem lies in the non-connectivity of their value chain. Manufacturers employ digitalisation in design and then move to automation while assembling, but the steps in between are not always connected. The same problem persists at different maturity levels when we move to other industries.

Presently there are discrete steps of the value chain that have been digitalised. A truly smart factory calls for data entering the value chain from one point and then moving along it wherever required. For example, if a product manufactured by a factory has a defect; to determine where the defect lies and its nature, the product specification will enter the value chain at a particular point. Now, instead of taking the product manually to different entry points in the value chain, a smart factory will be able to automatically determine the fault.

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Demand-supply graphs indicate that without a high degree of automation or digitalisation it might not be possible to satisfy the needs of end-customers. This will be true across sectors like automotive, defence, marine, high-end manufacturing, and others, requiring precision, speed, and flexibility. This is a great opportunity that Indian SMEs must be geared up for. However, in order to embrace digitalisation, SMEs need a significant amount of capital infusion. Currently, availability of finance is one of the major challenges that Indian SMEs are facing. While state-owned SME growth funds, lenders, and mainstream banking sector companies are offering expansion and working capital loans, they are far from adequate and often not affordable.

The need of the hour is innovative and low-cost finance through leasing companies offering project finance, equipment and leasing solutions, structured finance, capital loans, and advisory services. Also, SMEs desperately needmentorship. The other challenge is equally serious. While several SMEs are advanced in their processes and have made decent headway with respect to digitalisation, they lack a skilled workforce. For SMEs to sustain and grow, both labour and productivity has to come together. A few private sector companies are investing in training and skill development centres that allow SMEs to try complex concepts in industrial processes and also get access to their resources and technical application centres. However, the current skill-gap is huge, and expanding.

Innovation at global MNCs is outpacing their Indian counterparts and Indian SMEs always have to play catch-up. A real breakthrough in smart manufacturing will come when SMEs in India start partnering with IoT platforms that enable higher efficiency. That is why the next decade will require SMEs to partner, even piggyback, on companies that offer robust, proven, and cutting-edge digitalisation solutions. The need of the hour is digitalisation across value chains, strategic partnerships, innovative funding, and turn-key solutions that can make Indian factories smarter, more productivity and highly efficient. Fast!

The writer is executive vice-president and head, digital factory, Siemens India