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In Express Industry, MSMEs Find a Growth Enabler

Monday, March 11, 2019

Vijay Kumar, COO, Express Industry Council of India

Micro, small and medium enterprises sector, which constitute more than 90% of registered enterprises in the country, is the backbone of Indian economy. The sector’s contribution to India’s GDP has been on the rise, courtesy government focus on Make in India and boom in e-commerce. The latest government data show that the sector had contributed 30.7% of GDP in FY’15. This is expected to grow further with implementation of various measures for easy financing of MSME operations.

The growth momentum of MSME sector gained strength with simultaneous expansion of express industry, which denotes the machinery of quick movement of goods. The express delivery industry has been growing faster in India than anywhere else. As per Deloitte report entitled ‘Indian Express Industry 2018: A multi-modal play in building the ecosystem’ Indian express industry grew at CAGR of 15% between 2012 and 2017 as compared to 4% globally. This growth is going to further increase to 17% in next 5 years, helping the user industries benefit from its operations.

MSMEs, which form a significant portion of express industry clientele, usually have limited capacity to hold stocks of raw material and finished goods, besides facing challenges in managing their working capital due to delayed payments. Through its modal of expedited delivery, the express industry plays a crucial role in alleviating the problems and facilitating seamless growth for MSME clients. Some of the ways in which express industry is helping MSMEs grow are given below:

Just In Time Warehouse Management
India is a rapidly growing economy and clients tend to demand strict adherence to production and delivery by MSME vendors. This puts a lot of pressure on MSMEs to ensure timely production and delivery of goods to their clients. One of the ways of doing this is following a ‘Just in Time’ warehouse management strategy, which aligns raw material supply with production schedules. Express industry plays the role of enabler here by supplying raw material when required by MSMEs, thereby reducing the cost of storing raw material in warehouses. Through their advanced network, express industry also enables delivery of finished goods to MSME clients as per the schedule.

End-to-End Control on Delivery
The express industry has inducted advanced technology in operations with automation of critical functions such as tracking, scheduling, handling consumer conversations, etc. This helps scale up its capacity to cater to the growing demand for fast delivery by clients. The new technology also allows the companies to ensure precision delivery, thereby giving end-to-end control to MSME clients.

Customer Satisfaction
With the impact ofdigital penetration and an exponential grow in the ownership of smartphones, MSMEs have begun to gradually modify their operations to gain trade opportunities through e-commerce. For the express industry, e-commerce has been among its most important growth drivers. The increase in demand for e-commerce segment of express services is evident from the fact that customers are getting better acquainted and comfortable with these deliveries and are even willing to pay premiums for their fulfillment. Therefore, leading express players have become indispensable support for MSMEs striving to boost their growth and profits through e-commerce.
Outside e-commerce as well, MSMEs have been able to sell high-quality products at low costs as they had low overhead costs of warehousing and delivery.

Working Capital Management
A growing business needs to set aside a corpus to manage its daily operations. This corpus, known as working capital, depends on the amount that the company has to incur until the stage where the client settles the bills. The costs are usually incurred on raw material, production, warehousing, and delivery. Traditionally, working capital management has been a challenge for MSMEs as they are unable to recover their costs in time. However, with the support of express industry, MSMEs have been able to keep their costs low by managing warehouses efficiently. Also, the credit cycle has got shorter as satisfied clients tend to make early payments.

MSMEs are pegged to grow exponentially going forward with the government support in financing and bills recovery. The express industry, which is likely to grow to Rs 48,000 crore by FY’2022, is confident of playing the role of growth enabler in future as well.

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