Steel industry contributes more than 2% to India’s GDP. It’s a growing industry which is poised to grow further as a result of the infrastructure development the country is witnessing. Smart cities and road infrastructure development alone can push the demand for steel, go soaring.
Raipur, the capital city of Chhattisgarh, is home to India’s eminent steel manufacturers including major players like Bhilai Steel Plant (BSP), Tata Steel and Jindal Steel Works (JSW). However, the maximum manufacturing output comes from SME steel manufacturers who supply steel to these big players. An estimated 55% of steel manufacturing SMEs are based out of Raipur.
But is Raipur ready to meet the growing demand for steel which India Inc will need? A recent survey by BHP Billiton says that the demand for steel may double to 170 mt by 2025. To meet this demand, SME steel manufacturers must be readied. And Raipur steel manufacturing SMEs will play a huge role in this.
Currently, there are many challenges these SMEs face which impede their growth. Extended credit cycle, inadequate infrastructure, incompetent workforce, working capital shortages, and lack of technological know-how are some of the biggest of them.
Steel manufacturing SMEs in Raipur find it hard to manage working capital. This is because the credit cycle in SME steel manufacturing market usually stretches far beyond the timelines. Most of these SMEs do not have an Account Receivables mechanism in business. They do not have set processes and systems, which leads to fiscal indiscipline.
Another challenge is that steel manufacturing being highly dependent on metallurgical expertise; SMEs do not get experts with functional knowledge to work for them.
Moreover, most of these businesses being family run, their second generation is not keen on joining their businesses, forcing the SMEs to depend on employees who don’t understand the business or are not interested in driving it to the next level.
Production plants are not maintained well. The production workers are not at all monitored. Underutilization of resources, wrong inventory management or unused machinery leading to cost overruns, further stymie their growth.
Talking about growth, these SMEs do not have any plans or strategies for growth either. They depend entirely on their existing customers. There is no focus on new customer acquisition, manpower planning and budgeting, business expansion or prioritizing financial goals.
What these steel manufacturing SMEs need is a structured business run by professionals; come out of family business style and adopt a professional approach – hire the right talents, create strategies to increase sales, introduce finance systems in business to drive profitability and last but not the least become a process-driven company from people (owner)-centric one.
By streamlining their human resources and accounts management functions and strategizing growth, SMEs will be able to churn out optimum production output, bring quality across the entire value chain of production to delivery, and improve sales numbers that will be sustainable.
All they need is to acknowledge the fact that opportunities will be abound in the near future for steel manufacturing SMEs. But is Raipur ready to deliver?
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