AN EMPERICAL STUDY ON PERFORMANCE METRICS IN MSMES

BY-ADITYA SHANKAR ADITYA SINGHANIA GULZAR SINGH BHANU PRATAP SINGH

PROJECT GUIDEMRS. RAMAA R

INTRODUCTION

WHAT IS SUPPLY CHAIN?

S Also referred to as the logistics network S Suppliers, manufacturers, warehouses, distribution centers and

retail outlets facilitiesand the

S Raw materials S Work-in-process (WIP) inventory S Finished products

that flow between the facilities

S

WHEN SIMPLY STATED "the supply chain encompasses all of those activities associated with moving goods from the rawmaterials stage through to the end user."

Plan

Source

Make

Deliver

Buy

A set of approaches used to efficiently integrate

Suppliers Manufacturers Warehouses Distribution centers

So that the product is produced and distributed

In the right quantities To the right locations And at the right time

System-wide costs are minimized and Service level requirements are satisfied

THE SUPPLY CHAIN

Suppliers Manufacturers Warehouses & Distribution Centers Customers

Transportation Costs Material Costs

Transportation Costs

Manufacturing Costs

Transportation Costs Inventory Costs

Supply Chain Management Key Issues

PURCHASING

MANUFACTURING

DISTRIBUTION

CUSTOMER SALE/SERVICE

LOW PURCHA SE MULTIPL E VENDOR S

FEW CHANGEOVE RS STABLE SCHEDULES LONG RUN LENGTHES

LOW INVENTO RIES AND TRANSP ORTATIO N

HIGH INVENTORIE S HIGH SERVICE LEVELS REGIONAL STOCKS

The Importance of Supply Chain Management

S Shorter product life cycles of high-technology products S Less opportunity to accumulate historical data on customer demand S Wide choice of competing products makes it difficult to predict demand S The growth of technologies such as the Internet enable greater

collaboration between supply chain trading partners

S S

If you dont do it, your competitor will Major buyers such as Wal-Mart demand a level of supply chain maturity of its suppliers

S Availability of SCM technologies on the market S Firms have access to multiple products (e.g., SAP, Baan, Oracle, JD Edwards) with which to integrate internal processes

FEW EXAMPLES

S Dealing with uncertain environments matching supply and

demand
S

Boeing announced a $2.6 billion write-off in 1997 due to raw materials shortages, internal and supplier parts shortages and productivity inefficiencies U.S Surgical Corporation announced a $22 million loss in 1993 due to larger than anticipated inventories on the shelves of hospitals IBM sold out its supply of its new Aptiva PC in 1994 costing it millions in potential revenue Hewlett-Packard and Dell found it difficult to obtain important components for its PCs from Taiwanese suppliers in 1999 due to a massive earthquake

S S S

S U.S. firms spent $898 billion (10% of GDP) on supply-chain

related activities in 1998

What is a performance measurement system?

S S

It is a framework which measures the performance of different aspects of an enterprise. Performance measurement is a process for collecting and reporting information regarding the performance of an individual, group or organizations. It can involve looking at process/strategies in place, as well as whether outcomes are in line with what was intended or should have been achieved

S
S

PM systems enable executives to see how business results generated in the company's many different units combine to influence the enterprise's overall results.
The design of performance measurement systems appropriate for modern manufacturing firms is a topic of increasing concern for both academics and practitioners.

S
S

A lot of work has been done in this field to develop different models.
Frameworks, such as the balanced scorecard and the performance prism, have been proposed, but until recently little attention has been devoted to the question of how these frameworks can be populated.

S Thus, a PM system gives executives and managers a

comprehensive, high-level view of their organization's performanceand an understanding of how the company's different parts work together to produce business results.
S In many companies that use a PM system, senior executives

advocate adoption of the system and manage its implementation. But once the system has been established, all managers and employees in the organization contribute to and use it. But how? They define individual goals that support unit- and company-level goals, and they generate performance data that their supervisors then input into the system.

Pms Benefits
S They enable managers to define (and track performance on) metrics for

every strategic objective set by their unit and company. By noting performance that falls short of targets (for example, "Our goal was to reduce order-processing errors 10%, but we only reduced them 5%"), managers can address the causes of the shortfall and work to continually improve performance.
S They show how performance in different parts of the company affects

performance in other parts.

S For example, a company may discover that having the logistics staff achieve

the objective "Accelerate order-delivery time by 10%," helps the customer service group meet its objective "Increase customer satisfaction by 15%."
S By seeing these interrelationships, companies can make more informed

decisions. For instance, they can increase a budget, add new hires, or introduce a more efficient process to improve performanceinstead of guessing which factors need to be addressed.

Pms Practices
S

Several performance measurement systems are in use today, and each has its own group of supporters. For example, the Balanced score card (Kaplan andNorton,1993,1996,2001) Performance Prism (Neely,2002) The Cambridge Performance Measurement Process (Neely, 1996) Total Measurement Development Method (TMDM) (Tarkenton Productivity Group, 2000)

S S S S

Although the Balanced Scorecard has become very popular, there is no single version of the model that has been universally accepted. The diversity and unique requirements of different enterprises suggest that no one-size-fits-all approach will ever do the job.

Reviewing the performance of an organisation is also an important step when formulating the direction of the strategic activities. It is important to know where the strengths and weaknesses of the organisation lie, and as part of the Plan Do Check Act cycle, measurement plays a key role in quality and productivity improvement activities. The main reasons it is needed are: To ensure customer requirements have been met To be able to set sensible objectives and comply with them To provide standards for establishing comparisons To provide visibility and a scoreboard for people to monitor their own performance level To highlight quality problems and determine areas for priority attention To provide feedback for driving the improvement effort

S S S S S S

MSMES
S The Micro, Small and Medium Enterprise (MSME) has often been

termed the engine of growth for developing economies.

S The MSME sector is a significant contributor to the Indian

economy. Based on official figures from the Ministry of MSME, November 2008, this sector contributes 8% of National GDP, comprises 50% of Indias total manufactured exports, 45% of Indias total industrial employment and 95% of all industrial units.
S The SME sector in India, however,has been changing over time,

mostly through changes in government policy. In this section we will highlight the definition, profile, size, composition and performance of this sector.

DEFINITION OF MSME:-

S 1. 2. 3. S 1. 2. 3.

Manufacturing Sector Investment in plant & machinery Micro Less than Rs. 2.5 million Small Rs. 2.5 to Rs. 50 million Rs. (Before 2006: 2.5 10 mil Rs.) Medium Rs.50 million to Rs.100 million (Not defined before 2006) Service Sector Investment in equipments

Micro < 1 million Rs.

Small 1 20 million Rs. (Before 2006: < 1 million Rs.) Medium 20 50 million Rs. (Not defined before 2006)

Source: Ministry of Micro, Small & Medium Enterprises, 2007

THE MEDIUM ENTERPRISE HAS BEEN DEFINED FOR THE FIRST TIME UNDER THE MSMED ACT,2006 WHICH HAS COME INTO ACT FROM 2ND OCTOBER 2006.

S As of now there is no form statistics available in respect to

medium enterprise profile.

S But according to an informal sources the number of medium

enterprise in india is said to be between 10 thousand to 15 thousand and it contributes to 2 % GDP

Problem genesis
S We took up this problem knowing the reason why the overall

performance of this sector still lacks behind the large scale industries.
S Even though there are more in number the overall productivity is

still not what is expected.

S Also it is important for us to highlight the modern practices which

are not being followed by this sector .