There is a need to integrate finance into operations for
Indian Manufacturing 2.0 Manufacturing units today are far more amenable to automation. Given Covid19, large numbers of MSMEs in the country have experienced ‘near-death’. They realise that there is now a clear case for separating promoter and company financials and
Indian Manufacturing 2.0
Manufacturing units today are far more amenable to automation. Given Covid19, large numbers of MSMEs in the country have experienced ‘near-death’. They realise that there is now a clear case for separating promoter and company financials and looking at automation actively to ensure sustenance. Also given advancements in alternative data sources like – GST, eWay Bill etc. there are so many additional data points to triangulate the ‘truth’ about your business for a lender. In such a situation, you would rather be financially honest and start fully utilising ERPs and other automation in the ‘right spirit’.
With availability of information through ‘reliable automated channels’, you improve your ‘lend ability’ as a company. With access to reliable financials and through partnerships with platforms like Finovate Capital, you now have a greater chance to be financed even for your procurements at a ‘Click of Button’ inside your ERP. Additionally, instead of simply trying to make a ‘liquid fund’ return on your treasury, there is a clear case to multiply the amount at least 5 times by running a distributor finance program that gets you that quantum of money on Day 1 of shipping. Integrating Finance as a strategy into your manufacturing plans can radically improve your working capital profile.
Covid Impact: Investments, labor, supply chain and more
The only other country that rivals India to attract investments is Indonesia. Countries like Vietnam with much smaller populations are already struggling with labour shortages. Quality of talent is also a key consideration, Indonesia for instance produces only 8 STEM graduates per 1000 citizens, the number is significantly higher for India at 20. Also, in smaller economies it is much more challenging to find all components that go into your final product, here India may have a distinct advantage if we take up the ‘cluster approach’. I would summarise by saying, we have an opportunity that is for India to lose, proactive and coherent strategy for sustainable manufacturing clusters is the need of the hour.
Covid19 is rightly called the ‘Great Reset’. It gives us the chance to imagine what our India of the future should look like and mean to every citizen. While the citizens would love jobs and services, we have also seen the environmental benefits of Covid19. Our policies now need to be more ‘holistic’ and should focus on ‘sustainable’ manufacturing.
Accordingly India needs clarity on industries that we want to welcome, identifying locations where these clusters could be created to unlock economies of scale, environmental expectations (solar, water, waste management) from them and update of CSR policy for industries that employ fewer people. Accordingly, net positive Social Impact to these clusters should be considered actively to create a more equitable world for the lower strata of the society.
The traditional Indian businessman always made the argument of the ‘huge and cheap’ labour pool to resist the need for automation. However given that not one person could make it to the factory for an extended period of time, has challenged this fallacy. Given that business sustenance would now take precedence, you will see the business community more amenable to automation and ‘man-less’ factories. This by itself is a huge game changer for Indian manufacturing.
To support this mindset change and leverage the tailwinds, we need land reforms and clusters identified that provide the requisite ‘preferably single window’ clearance for these companies. Additionally, we should continue investing in alternative energy sources to provide the ‘lower cost’ electricity needed by these industries to function. On the type of industries, we would want to welcome into India, we need to be selective, and preference should be before given to non-polluting and less water intensive industries. Another aspect should be the quantum of employment generated by the segment. Accordingly, we should try and follow the cluster strategy adopted by China to concentrate on particular type of industries in certain geographical belts to help ‘unlock’ more efficiency.
Advice to promoters and CFOs
Your supplier and distributor relationships have been nurtured over a long period of time. In times like Covid19, it is important for the strongest link in the Supply Chain to help the weaker link survive and subsequently thrive. This also makes business sense given the reliability and convenience that these stakeholders bring to your overall supply chain.
You must actively reach out to platforms like Finovate Capital, that run multi lender programs that can help support ALL your suppliers and distributors. Running single lender Supply Chain Finance programs do not cut ice any more as lenders tend to be very selective about the borrower profiles. The Supply Chain Finance programs offered by Finovate Capital help dramatically improve your cash flows, de-leverage your balance sheets (through transfer of debt), get you extended payment days and also improve EBITDA margins through our Early Payments program. Your suppliers and distributors will love you for our programs and will much appreciate easy access to get capital in these uncertain times. As a company, you are duty bound as a company to help them survive for your own sakes.
– Aljo Joseph
Co-Founder & Chief Business Officer, Finovate Capital
Hits: 91
