Small and Medium Enterprises (SMEs) play a vital role in the economic development of all countries worldwide. SMEs account for 90% of business establishments and half or more of the output and export share, and generate employment opportunities close to 70% of the labor force. Hence, it is no surprise that globally SMEs are an indispensable part of the supply chain in all major industrial sectors.
The global defence industry which is primarily dominated by a few Original Equipment Manufacturers (OEMs), works similarly in close co-ordination with SMEs and their prime contractors through a well defined supply chain. The reason why OEMs / prime contractors prefer to work with SMEs is because of their innovative capabilities in niche manufacturing, greater flexibility, lower overhead costs and their ability to learn and absorb new technologies.
OEMs require that the SMEs they work with should have the ability to perform, maintain continuity of supplies and clearly understand how the defence procurement procedure works.
Hence, to be able to integrate successfully in the value chain,SMEs must try to develop niche products and capabilities, continuously innovate and fully leverage export opportunities that are now available to them under the Defence offset policy. To be able to integrate in the supply chain, SMEs need to know their customers well, understand their requirements, gain their confidence and demonstrate a strong commitment to develop a long term business relationship. Such initiatives by SMEs coupled with government’s policy to enhance the role of SMEs in the Indian defence industry, including participation in defence R&D, are the need of the hour if India is to emerge as one of the most important defence markets in the world.
Recently the Prime Minister announced the constitution of a high-level Task Force for SMEs which is to inter-alia identify problems and issues that they face and take effective steps to resolve them.