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All the enthusiastic entrepreneurs are rejoicing ever since Government of India has launched “Make In India” concept. Small businesses are thriving more than it has ever been. Even young entrepreneurs are fearless to launch their business ideas and taking advantages of “Make In India” provisions to be their own boss. The government as well making no stone unturned to grow Indian market in sectors like manufacturing and service industry. However, in spite of all this enthusiasm by business owners and government, industrial manufacturing sector is facing many road blocks as a start up. Here we will see 7 major challenges faced by a manufacturing business or a manufacturing start up.
The first thing to gear up a business plan for a manufacturing entrepreneur is to raise fund or acquire loan. Acquiring business loan has been a major problem in India due to lack of any collateral to offer the bank. More than 80% of population resides in middle class family, and without any collateral a manufacturing business plan by these families fails to even launch sometimes. Another method of funding for manufacturing business if angel investments and seed investments. Those are easy to find as amounts are small. But the later stage of funding challenges the business to grow. Entrepreneurs burn these small funds easily and are always in search of more funds rather than business development. Lack of organised plan to grow business leads these entrepreneurships on a downside or being sold out at the end.
One of the biggest challenge manufacturing sectors in India faces is lack of research & development. Truth be told, chief manufacturing companies in India is able to acquire R&D facilities due to foreign investments but a manufacturing unit in its growing stage is unable to do so. And to be a manufacturing leader at global level, being a technology leader is a must. Similarly, IP protection and enforcement in India is expensive and includes high risk. After the “Make In India” it is going under many changes but it is in fact bringing more complexity to small manufacturers. Also, the process of registration of patents and trademarks being minor challenge but affects an individual unit in greater terms.
Only 8% of logistic facilities in India provide a good level of technology and maintenance a manufacturing unit requires. There is definitely a great opportunity to grow logistic sectors but India has a long way to go. Other warehouses are owned by small or medium size players with small capacity and hence, poor handling of goods and management makes it another challenge for a manufacturing business. Transportation as well is expensive and slow in India. It can take weeks to get products to the coasts from some places in India. India ports are not used to their capacity. Of course Government of India is investing more funds in building strong networks of roads, rails and other transport to increase growth of manufacturing sector. Yet inadequate skills of employees and unorganised transportation sector in cannot be overlooked as it results in ineffective industrial supply.
Competition was and always will be a challenge for any kind of business. But in India having second largest population in the world as well as accepting 100% foreign investment in some of the sectors like ports logistic, the challenge is bigger than one can imagine. Finding a niche market and place the product as best in front of end user has becoming more difficult. Consumer as well wants more with fewer payments, challenging manufacturers to improve more. Also, competition in terms of acquiring skilled employees is challenging as skilled talent is hesitant to join start-ups in fear of downsizing and mass firing to reach a required scale by manufacturing entrepreneurs. Also, early stage or pre series-start-up business have low pay scale than their corporate peers. Most start-ups in a bid to outgrow, hire inadequate talent without processes, and finally end up on the losing side.
India sure is in spur to grow as a manufacturing hub in global market but most of the manufacturing companies are intend to fail due to lack of sustaining to volatile market. Indian market is always volatile that always goes through rapid changes in terms of technology and marketing strategy which creates huge pressure on a start-up business. Also, India relies too much on FDI and outsourcing to fund projects and Indian market is sensitive to global economy’s volatility. And these start-ups struggle in coping with the market changes. Only way to reduce this risk is to be updated and upgrading the organization accordingly and keeping a consistency in up-gradation. It requires entrepreneurs to evaluate their market position, aims, and concept regularly.
There is a huge blunder of using technology in manufacturing start ups. For managing inventory and high level production flow, in some part of country entrepreneur having small factory still uses traditional recording system instead of ERP, let alone be Cloud based ERP system. Further leaving them at the end of market road in consistent production, fast production system and huge volume based production. Again, failing them in serving customer whose requirements are high in volume. Lack of using ERP system also makes these entrepreneurs unable to share exact information with other market players which results in miscommunication.
According to the World Bank, India has one of the most rigid laws in the world. Many opinions say that it will be a huge barrier for manufacturers to reap “Make In India” concept’s benefits. Though government is making rapid reforms which might change manufacturing sector and will give a massive boost but still it requires a lot of patience. Long awaited GST bill is pressing more on redefining asset management on how manufacturing business does; including purchasing software is being considered an intangible asset. Hence, promoting technology for manufacturer start ups.
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