A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &

MEDIUM ENTERPRISES

CHAPTER: 01

INTRODUCTION

A STUDY ON PRODUCTION MANAGEMENT IN MSME. A CASE

STUDY OF SUMATHI INDUSTRIES

The Micro, Small and Medium enterprises (MSMEs) have been accepted as the engine of
economic growth and for promoting equitable development in all over the world. Let there be
any category of countries (Developed, Developing and Under Developed), the existence of
MSMEs is inevitable. In India, the MSMEs contribution is highly remarkable in the overall
industrial economy of the country. The major advantage of the sector is its pivotal role through
its contribution in Industrial output, Exports, and majorly in Employment generation at low
capital cost. The labour intensity of the MSME sector is much higher than that of the large
enterprises. The MSMEs constitute over 90% of total enterprises in most of the economies and
are credited with generating the highest rates of employment growth and account for a major
share of industrial production and exports.

The recent global competitiveness requirements create a tensed business environment that drives
companies to improve and innovate continuously. Various efforts have been proposed to find a
better way to provide the highest level of quality, competitive manufacturing cost, and
synchronized delivery, lack of new product development for business continuity, and
unconvincing industrial networking and co-operation.

In Indian market, MSMEs rapid growth could be seen as Indian entrepreneurs are making
remarkable progress in various Industries like Manufacturing, Precision engineering Design,

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 1

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

Food processing, Pharmaceutical, Textile & Garments, Retail, IT & ITES, Agro and Service
Sector. Though, MSMEs contribution is phenomenal in the growth of Indian economy,
Simultaneously, MSMEs are facing intense pressure and constraints to sustain their
competitiveness in globalized world. Some other issues such as recession, low demand, finance,
heavy competition from MNCs etc. are becoming conspicuous dilemma to MSMEs in India.

Small and Medium Enterprises (SMEs), also known as small and medium scale industries or
businesses, are the essential part of a healthy economy. The SME sector represents over 90 per
cent of enterprises in most of the developing countries and contributes 40-60 per cent of the total
output or value added to the National economy. In recent years the MSME sector has
consistently registered higher growth rate compared to the overall industrial sector.

INVESTMENT LEVEL OF MSMEs:

MSME AS PER MSMED ACT, 2006

Activity Of Enterprise Manufacturing/Production Rendering of services

of goods
Type of Investment Plant and machinery Equipment

Micro Enterprise Up to Rs. 25 Lakhs Up to Rs. 10 Lakhs

Small Enterprise More than Rs. 25 lakhs More Than Rs. 10 Lakhs and
up to Rs. 2 crore
Medium Enterprises More than Rs. 5 crore and up More than Rs. 2 crore and up
to Rs. 10 crore to Rs. 5 crore

As per the Micro, Small and Medium Enterprises Development Act, 2006, in the manufacturing
sector an enterprise with investment in plant and machinery up to 25 lakhs is termed as micro
enterprise, an enterprise with investment more than 25 lakhs is termed as small enterprises, and
an enterprise with investment up to 10 crore is defined as medium enterprise. In the service
sector enterprises with investment in equipment up to 10 lakhs are classified as micro enterprise,

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 2

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

an enterprise with investment in equipment up to 2 crore are classified as small enterprise, and an
enterprise with investment in equipment up to 5 crore are termed as medium enterprise. Small
and Medium Enterprises are a major contributor of the GDP of a country and an even larger
contributor to the segments of exports and employment.

The MSME growth has been propelled by fresh investments in heavy and basic industries, the
contribution to exports and employment has been significant in the wake of increased
manufacturing activity and the increasing prominence of service sector companies in this space.
They are widely dispersed across the country and produce a diverse range of product and service.
It helps in the growth of a country as well as production.

EMERGENCE OF MSME:

 Based on Gandhian Model

 Encouraged by MSME act 2006
 During pre-liberalization period 1991, India accorded high priority to small and medium
enterprises
 The scenario for small scale industry changed with industrial policy establishment
 Post liberalization era reflected growth of small scale industries and it was almost 3 times
of total industrial sector.

CHARACTERISTICS OF MSMEs:

 Low cost of production

 Greater Operational Flexibility
 High capacity to innovate exports
 High employment orientation
 Reduction of regional imbalance
 Born out of individual initiatives and skills

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 3

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

ROLE OF MSMEs IN INDIA:

Micro, Small and Medium Enterprises (MSMEs) are crucial for the economic growth and
stability of any country and play a vital role especially for developing countries as they facilitate
economic activity and provide employment thus contributing to poverty reduction. In the Indian
context they can be considered as a back bone of National economy.

 Employment Generation
 Production
 Export Contribution
 Utilizing Resource Optimally
 Increase GDP
 Growth of country

TYPES OF MSMEs:

MSMEs are classified in to two Manufacturing and Service enterprises.

1. Manufacturing Enterprises:

 Micro Enterprise: Micro Enterprise generally refers to a small business

employing 10 people or less. It is an enterprise in which investments in plant and
machinery is between 5 lakh to 25 lakh. This enterprise works and operates not by
choice but out of necessity.
 Small Enterprise: Small Enterprise generally refers to a business employing 50
persons or less. It is an enterprise in which investments in plant and machinery is
between 25 lakh to 5 crore. This enterprise works and operates to earn a small
amount of profit.

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 4

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

 Medium Enterprise: Medium Enterprise refers to a business employing

maximum to 250 employees. It is an enterprise in which investment in plant and
machinery is between 5 crore to 10 crore. This enterprise works and operates to
earn a fair amount of profits to increase their standard of living.

2. Service Enterprises:

 Micro Enterprise: An enterprise in which investment in plant and machinery is

up to 10 lakhs.
 Small Enterprise: An enterprise in which investments in plant and machinery is
from 10 lakhs to 2 crores
 Medium Enterprise: An enterprise in which investment in plant and machinery
is from 2 crores to 5 crores.

CONTRIBUTION & PERFORMANCE OF MSMEs:

 45% Industrial Production

 10% Exports
 31 Million Employment
 13 Million MSMEs producing more than 800 products

MEASURES TAKEN BY THE GOVERNMENT:

 National Manufacturing Competitiveness Programme (NMCP) Schemes Under X I Plan

 Micro & Small Enterprises Cluster Development Programme (MSE-CDP)
 Credit Linked Capital Subsidy Scheme for Technology Upgradation
 Credit Guarantee Scheme
 ISO 9000/ISO 14001 Certification Reimbursement Scheme

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 5

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

 Scheme of Micro Finance Programme

 Scheme of National Award
 Guidelines of Scheme for Assistance to training Institutions ( English/Hindi)
 Scheme of Fund for Registration of Traditional Industries (SFURTI)
 Rajiv Gandhi Udyami Mitra Yojana (RGUMY)
 Marketing Assistance Scheme
 Performance and Credit Rating Scheme

INDUSTRIES UNDER MSME:

 Food Processing (KFC Product, burger pasta etc)

 Agriculture Inputs (Seeds, Fertilizers)
 Chemicals & Pharmaceuticals (Medicines)
 Engineering (Electricals, Electronics)
 Textiles & Garments
 Meat Products
 Sports Goods
 Plastic Products
 Computer Software, etc.

AIM OF MSME:
MSME development as a tool of state policy aims at:

 Generation of Employment
 Dispersal of Economy
 Utilization of local skills and resources
 Meet demands locally

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 6

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

CHALLENGES FOR MSMEs:

 Follow up with various government agencies to resolve problems due to lack of man
power and knowledge etc.
 Inadequate credit assistance.
 Irregular supply of raw material.
 Absence of organized marketing.
 Lack of machinery and equipment.
 Absence of adequate infrastructure.
 Competition from large-scale units and imported articles.
 Lack of adequate capital
 Getting statutory clearances related to power, environment, labour etc.
 Access to markets
 Ineffective marketing strategy
 Constraints on modernization & expansions
 Other problems like poor project planning, managerial, inadequacies, old and
orthodox designs, high degree of obsolescence and huge number of bogus concerns
etc.

To counter the challenges faced by MSME sector and grab the opportunities in the market, the
chamber has developed key strategies to promote and support the MSME sector. The chamber
encourages MSMEs to adopt innovative ideas and concepts for the promotion of their business. The
goal of the chamber is to organize Seminars, Conferences, Workshops and Training Programs and other
trade promotional activities to educate & create awareness amongst the MSMEs.

MODERNIZATION FOR MSME IN INDIA.

Modernization has different meaning for different business and it depends on the internal and
external factors that affect business like product demand, countries economy, availability of fund
and source of financing, and others.

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 7

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

Modernization of a firm can be in terms of fixed assets like land and buildings, machineries used
in production.

Other area of developing or expanding a MSME are like investing money in marketing of the
product or the brand name of the project, increasing the production quantity and quality of the
product establishing research and development unit for the firm or taking help of other firms to
perform R&D for it, upgrading the information technology of the firm like installation of
automated machines and cctv for security purpose. Modernization can be in terms of supply
chain management both in forward and backward integration. Even increasing the number of
work force of firm is a modernizing for MSME in India. Modernization is growth of the firm and
it comes with a cost. When it is a cost then it needs finance. The loan can be of long term or short
term depending on the type of modernization.

ACCESS TO FINANCIAL CREDIT AVAILABLE TO MSMEs IN INDIA:

The provision of finance to the Small and Medium Enterprise (SME) segment is a topic of
crucial policy importance. In Ireland, over two-thirds of private sector employment is accounted
for by these firms (Lawless et al., 2012), with their prospects more closely linked to that of the
domestic economy than is the case for larger firms. The post-crisis debate in Ireland has focused
almost exclusively on the provision of bank credit to SMEs.

While banks are generally thought of as the chief provider of external finance to SMEs (Beck et
al., 2008), their importance in the financing of Irish

SME’S has not been empirically assessed. This Letter uses three independent survey data sets to
shed light on the issue, both by comparing Irish SME financing to other European countries, and
by highlighting changes in Irish SMEs’ funding mix since the onset of the financial crisis.

Firstly, we use data from 2005 and 2012 to compare the importance of banks in funding Irish
SMEs’ working capital and investment relative to SMEs across Europe. Evidence is provided
that Irish SMEs are either the most, or second most, reliant in our European sample on bank
borrowing, whether measured by the share of SMEs that use bank borrowing, or by the
percentage of firms working capital or investment financed by bank borrowing. That these
findings hold in both pre and post-crisis surveys suggests the patterns are Structural

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 8

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

characteristics of the Irish economy. Secondly, comparable data on the funding mix of Irish
SMEs in 2005 and 2012 are created to highlight changes occurring since the onset of the
financial crisis. The data reveal a striking pattern whereby, among firms with a demand for
financing, the share of firms using bank borrowing for either working capital or investment
purposes has fallen by one half between 2005 and 2012. Internal funding (for investment), along
with trade credit and equity (for both investment and working capital) are being used more
intensively by Irish SMEs in 2012 than in 2005, suggesting that a substitution from bank to
alternative financing has taken place. It is likely that SMEs in countries with a heavy reliance on
banks for funding will be disproportionately impacted by difficulties in the banking sector. While
banks, with a comparative advantage in credit information processing and intermediation, must
continue to play an important role in funding the SME segment, a more diversified mix of
funding options than those currently available would represent a more sustainable long-run Irish
SME financing environment. At both national1 and European level, a range of policy actions
have been put in place which aim to create a more diversified set of viable funding options for
SMEs. The findings of this Letter provide support for such policies.

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 9

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

CHAPTER: 02

RESEARCH DESIGN

INTRODUCTION: A STUDY ON PRODUCTION MANAGEMENT IN

MSME. A CASE STUDY OF SUMATHI INDUSTRIES.

The ministry of Micro, Small and Medium Enterprises has launched the National Manufacturing
competitiveness Program (NMCP) to improve the competitiveness of the Micro, Small and
Medium Enterprises (MSME) sector. The initiatives under the NMCP aim at increasing
productivity, as well as expanding domestic and global market share of Indian MSME products.
The success of NMCP depends on the active support and involvement of the state Governments.

STATEMENT OF THE PROBLEM:

The financial problem of MSMEs is the root cause for all the other problems faced by the
MSME sector. These industries (especially micro) are generally poor and there are no facilities
for cheap credit. They fall in to the clutches of money lender who charges exhibited rate of
interest. The major problem that the micro and small enterprises have to content with the
procurement of raw materials. One of the main problems faced by micro and small enterprises is
in the field of marketing also. These units often do not possess any marketing organization.

OBJECTIVES OF THE STUDY:

 To study the overview of Micro Small and Medium Enterprises.

 To examine the growth of employment, output, promotion of exports of MSMEs in India.

 To study the performance of MSMEs in India & future prospects.

 To analyze the role of MSME sector in generating employment in India.

 To facilitate MSMEs in adopting modern and environment friendly technologies.

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 10
A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

 To empower MSMEs to become a part of the global value chain.

 To highlight the challenges facing MSMEs in the Caribbean to scaling up successful

businesses, and to identify successful measures and programs to address these challenges.

 To establish database of the MSMEs information and capacity building in production

management.

 To meet a major part of the increased demand for consumer goods and simple producer

SCOPE OF THE STUDY:

Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and
dynamic sector of the Indian economy over the last five decades.

MSMEs not only play crucial role in providing large employment opportunities at comparatively
lower capital cost than large industries but also help in industrialization of rural & backward
areas, thereby, reducing regional imbalances, assuring more equitable distribution of national
income and wealth.

MSMEs are complementary to large industries as ancillary units and this sector contributes
enormously to the socio-economic development of the country.

The sector consisting of 36 million units, as of the day, provides employment to over 80 million
persons. The sector through more than 6,000 products contributes about 8% to GDP besides 45%
to the total manufacturing output and 40% to the exports from the country.

The MSME sector has the potential to spread industrial growth across the country and can be a
major partner in the process of inclusive growth Study of various facility layout plans (Process,
Product, Fixed and Hybrid). Situations in which they are best implemented.

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 11

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

This research study helps to ascertain the strength and weakness of product & services of getting
info services. This study will help to know the improvements which can be made to improve the
present services.

RESEARCH METHODOLOGY:

Research Methodology specifies the methods and procedures for conducting a particular study.
A research design is the arrangement of conditions for collection and analysis of the data in a
manner that aims to combine relevance to their search purpose with economy in procedure. The
main source of data collected through primary as well as secondary data.

COLLECTION OF DATA:

 The study proposed to collect (Primary Data) through questionnaire using survey
method. So as to give a precise, accurate, realistic and relevant data.

 The (Secondary Data) taken from different books on the related topics, web portals, and
other statistics, various journals, newspapers and magazines. Substantial information has
been gathered from these sources thus allowing for appropriate analysis, compilation,
interpretation and structuring of the entire study.

SAMPLE DESIGN:

Sample design is a definite plan for obtaining a sample from a given population. It refers to the
technique to the procedure adopted in selecting items for the sampling designs are as below:

SAMPLE SIZE

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 12

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

The sample size has been 70 Employees. Conclusions had been arrived at using the response of
the questionnaire.

Here we have decided to adopt 70 employees in the company as sample size who belong to the
same frame, as initiated in the study.

LIMITATIONS OF THE STUDY:

Although all effort was taken to make the result of the survey as accurate as possible, there were
certain constraints during the study.

 The high-interest rates charged and collateral requirements by banks are one of the major
issues when MSMEs want to raise their capital.
 Market access for MSMEs is still very limited. This is due to lack of capital and various
other reasons they cannot tap profitable export markets.
 The need for skill development and training has not been addressed adequately which can
be another issue.
 Outdated technology and innovation can be one of the issues since the use of such
technology impedes MSMEs’ competitiveness and growth in production management.

TOOLS FOR ANALYSIS AND INTERPRETATION:

This project is analyzed by using different statistical tools for the study such as table were
constructed for tabulating the data, pie chart, graph will be used to draw for effective
understanding.

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 13

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

CHAPTER:03

COMPANY PROFILE

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 14

A STUDY ON PRODUCTION MANAGEMENT IN MINISTRY OF MICRO, SMALL &
MEDIUM ENTERPRISES

GT INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH Page 15