ZED: The Right Way Forward for MSMEs

Q. What exactly is the MSME ZED Scheme? When was the scheme launched?

MSME ZED scheme namely ‘Financial Support to MSMEs in ZED Certification Scheme’ envisages promotion of Zero Defect and Zero Effect (ZED) manufacturing amongst MSMEs and ZED Assessment for their certification with objectives like:

  • Develop an ecosystem for ‘zero defect’ manufacturing in MSMEs.
  • Promote adaptation of ‘quality’ tools / systems and ‘energy-efficient’ manufacturing.
  • Enable MSMEs for manufacturing of quality products.
  • Encourage MSMEs to constantly upgrade their quality standards in products and processes.
  • Drive manufacturing with adoption of ‘zero defect’ production processes, without impacting the environment.
  • Support ‘Make in India’ campaign.
  • Develop professionals in the area of ZED manufacturing and certification.

The scheme is an extensive drive to create proper awareness in MSMEs about ZED manufacturing and motivate them for assessment of their enterprise for ZED and support them. After ZED assessment and adoption of proper tools, MSMEs can reduce wastages substantially, increase productivity, expand their market as IOPs, vendors to CPSUs, more IPRs, development of new products and processes etc.

The Ministry of Micro, Small & Medium Enterprises (MSME), Government of India launched this scheme on 18th October, 2016 at Ludhiana, Punjab at the hands of the Hon’ble Prime Minister.


The larger vision is for Zero Defect and Zero Effect (ZED) to become globally accepted; to be the Indian Certification System accepted and adopted world over, thereby reducing trade barriers,
— R. K. Rai // Additional Secretary & Development Commissioner (MSME)

Q. What are the main parameters on which the MSMEs will be assessed in this scheme?

Under ZED Maturity Assessment Model there are 50 parameters for ZED rating and 25 additional parameters for ZED Defence rating on which the MSME will be assessed and rated under ZED. The MSME applicant is required to comply with identified 20 essential parameters and at least 10 other parameters (as per the MSME’s domain competency, i.e., sector of operation and type of industry) as per ZED guidelines. Hence, the MSME will be rated on a minimum of 30 parameters for the assessment process; in which, 20 parameters are essential parameters and 10 parameters are selected as per the domain of the MSME.

The main parameters cover various aspects like technology selection and upgradation, process capability, automation, waste management, safe working environment, energy efficiency etc.

Q. How has been the response to the scheme till now? Is the registration process complete?

The response so far has been encouraging considering the fact that the ZED scheme was launched only on 18th October 2016.

  • We have over 2,300 MSMEs registered for ZED certification till now.
  • This is just the beginning and about 50 MSMEs have already paid for ‘Desktop Assessments’.
  • We are hopeful that this number will exponentially increase in the coming years and we will achieve our target of 22,222 certifications.
  • Registration is an ongoing process and will continue until there is a demand for assessment.

Q. A general feedback we get to hear about the MSMEs is that they are very conservative to take a high-tech path. What do you think is a more truthful assessment?

MSMEs tend to demonstrate culture (or country) specific business practices. However, in spite of the recognized diversity of business practices, strong homogeneous tendencies and norms have been developing especially among the small businesses that operate in the global marketplace.

Successful MSMEs plan for these constraints and learn how to adapt quickly to change.

Having said that, I would like to state that inZEDmodel;there are effective,but low-cost initiatives like implementation of 5S, Kaizen, DWM, waste reduction, process control, low cost technology, energy conservation, design incubation etc. where MSMEs can enhance their sales as well as profits without much of capital investment and working around few of these constraints. ZED rating eventually will enable to MSMEs to be a part of the global value chain and improve their competitiveness and profitability.

Q. Which are the unique strengths of the sector that need focused strengthening and recognition? 

In ‘Make in India’ initiative, there are 25 sectors and ZED has been designed to meet specific requirements of these sectors. To cater to their needs, ZED model focuses on special strengths and specific requirements of all these sectors.

ZED focuses to enhance the competitiveness of Indian manufacturing, globally.

Q. What role do you see the automation companies playing in the success of the scheme?

Industrial automation has produced many of today’s technological advances.

  • Automation allows the creation of complex applications to become a reality, thus emphasizing its importance.
  • There is an enormous economic potential of Industry 4.0., though the MSMEs in the industry remain relatively cautious about it. It is not easy for small and medium-sized enterprises, due to lack of resources, to assess the technological maturity of the relevant solutions and their business uses. Lack of standards and norms with regards to interface technologies is another reason why investments in the integration of IT systems are either not carried out or delayed. This is where ZED could bridge the gap with the help of trained consultants, who will mentor the MSMEs to adopt automation.
  • The automation companies will have a big role to play in building and increasing the competitiveness of our MSMEs; the main objective of ZED is to enhance their global competitiveness through implementation of various tools and interventions.
  • Through automation, relevant parameters in ZED will assist in increasing production rates, productivity, the efficiency with materials, product quality, worker safety, flexibility and convertibility in manufacturing processes
  • Automation will also help reduce waste, factory lead times and production costs. Incorporation of ZED will ensure that the automation process is attuned to minimizing adverse impact on the environment.

Automation will allow our MSMEs to produce a broader range of products with the ease of being able to switch from product A to B without having to reconstruct the entire production lines.

  • As technology advances, so does the importance of automation.
  • Lastly, we are ourselves automating a lot processes in the implementation of this scheme. The Quality Council of India, as NMIU, is ensuring effective monitoring and implementation of this scheme with the help of automation companies.

Q. How does the Ministry propose to incentivize adoption of automated controls and quality tracking by Indian MSMEs?

Automation is inevitable. Large companies increasingly use robots on production lines or algorithms to optimize their logistics, manage inventory and carry out other core business functions.

  • For us as policymakers, an embrace of automation could go hand in hand with measures to support our MSMEs.

  • The Ministry can accelerate early development and adoption of automation technologies, both in regards to the technology development and for its deployment.
  • The support that MSMEs would expect could include investments in developing the technologies themselves, including funding basic research and support for commercialization, as well as supporting investments in digitally enabled infrastructure for automation.
  • The Ministry of MSME already has incentive/subsidy/funding schemes which assist our MSMEs in adopting latest technologies.
  • ZED model focuses a lot on automation to assure the quality of processes and products. With a critical mass of ZED rated MSMEs in place along with adoption of automated controls and quality tracking by Indian MSMEs, we expect the kicking in of a virtuous cycle which will be self propagating.

Q. What challenges do you foresee that the MSME sector will face in getting the ZED certification?

A MINDSET CHANGE

For an MSME, the bottom line is perhaps the top priority. They want to see immediate benefits for any investments they make. ZED aims to change this mindset by highlighting the internal benefits that an MSME will have by adopting best practices and the long-term cost competitiveness ZED will bring. However, MSMEs may fail to see this long-term vision.

Also, unfortunately, being environmentally conscious is perhaps not the top priority of our MSMEs. ZED is attempting to change this mindset and emphasizing the notion that Earth should not be seen as inherited from our ancestors, but as borrowed from our kids. ZED aims to propagate ‘Responsible Manufacturing’. MSMEs must realize that the costs involved in maintaining an environment-friendly product are an investment and not an expense.

COMPLETE ADOPTION

  • One of the key challenges will be to ensure that the top management of MSME understand the leadership requirements of implementing ZED and behave in such a way that these terms are met.
  • The top-down approach is crucial for the success of ZED.

NOT JUST A CERTIFICATION

  • One of the most critical aspects that MSMEs must understand is that the ZED journey does not end just at rating and certification.
  • ZED is a maturity assessment model. Rating is needed to know where an MSME stands vis-à-vis global benchmarks.
  • Using principles of consultation and participation will become vital to the content of the ZED, by getting the employees involved in the process, ensuring their future support and input.
  • Since handholding is an optional component in the scheme, MSMEs may not opt for this vital cog.

Q. What support is the MSME Ministry extending to the MSMEs towards this scheme?

The Ministry, along with the Quality Council of India, is creating an entire ecosystem for the MSMEs for an easy adoption of the ZED Scheme. The support of this Ministry under the scheme also consists of financial support (subsidy) in assessment and rating, and handholding activities of the ZED scheme wherein the Government is extending a financial support of 80% to Micro Enterprises, 60% to Small Enterprises and 50% to Medium Enterprises on the costs of assessment/certification and hand holding activities.

Apart from the above, a few of such other support include:

  • Capacity Building Programmes for MSMEs: 5-day capacity building programmes are being conducted in their region to enhance their knowledge of ZED.
  • Also, we are connecting with large enterprises and OEMs to support us in this scheme. Organisations like Tata Chemicals, Ashok Leyland, Maruti Centre for Excellence etc. have already signed a MoU with QCI to become a ZED Cell and take forward the implementation of this scheme.

Q. What is your overall goal for Indian MSME sector in coming few years? How will the ZED scheme support this goal?

The ultimate vision is for our MSMEs to become globally competitive and make India a manufacturing hub.

ZED scheme is poised to be a game changer for the Indian industry and show the path to our MSMEs towards global competitiveness.

The larger vision is for ZED to become globally accepted; to be the Indian Certification System accepted and adopted world over, thereby reducing trade barriers.

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