SMEs: Double your Profit without Capital Investment
“How do you roll-out Quality Improvement in a SME?”.
I have been asked this question at various platforms across the country. More recently, I was once again asked this question during the course of my webinar on Performance Excellence. This frequently asked question is undoubtedly of critical importance for SMEs in India.
As we all know, SMEs are the backbone of our economy. Large organizations outsource / purchase very significantly from SMEs. In fact, large organizations purchase over 80% of the capacity of SMEs, thereby becoming an A-Category customer for each SME. Examples abound in the manufacturing and service sectors: earthmoving equipment, automobiles, tractors, hotels, airlines, hospitals, and many more.
What makes an SME different to a large organization? The answer is “ownership”. SMEs are usually family businesses. Consequently, few family members from multiple generations wear multiple management hats.
I wish to remind the owners of SMEs that Quality Improvement is not fully delegable. There is a role for the few family members in each SME. Their main job is to establish the infrastructure for Quality Improvement. This involves:
- A process for identifying the Chronic Problems of the organization
- A process for translating the impact of a Chronic Problem into the language of money – referred to as the Cost Of Poor Quality (COPQ)
- A process for prioritizing the Chronic Problems and formalizing the vital few into Quality Improvement Projects – with COPQ reduction targets
- A process for formalizing Quality Improvement Teams, project-by-project
- A process for structured Quality Improvement, to be adopted by each Quality Improvement Team
- A process for review of Quality Improvement Teams, including COPQ reduction achieved
- A process for recognition of successful completion of a Quality Improvement Project.
Family members of SMEs should note that the COPQ in any organization, large or small, is at least 25% of their total costs. This is an opportunity to double their profit without any capital investment.