Successful SME Informatization in Successful SME Informatization in The Manufacturing Sector :The Manufacturing Sector :

MalaysiaMalaysia’’s Overviews Overview2004 APEC Informatization Policy Forum for

Small and Medium Enterprises

Seoul, Korea

15 July 2004

SMIDP (Small and Medium Industry Master Plan)

ICT Programmes for SMEs

Benchmarking

SMIDEC – SME Information Center

MANUFACTURING COMPANIES WITH AN ANNUAL SALES

TURNOVER NOT EXCEEDING RM 25MILLION AND FULL-TIME

EMPLOYEES NOT EXCEEDING 150

SMALL AND MEDIUM INDUSTRIES DEVELOPMENT

PLAN

Enable SMEs to be productivity-driven, technologically capable and globally competitive;

Facilitate organisational change at the enterpriselevel to accelerate the transition towardsinternational production platforms; and

Promote lead enterprise to deepen cluster development.

AIM:

to prepare SMEs for challenges andopportunities arising from trade liberalisation, globalisation and advances in IT

Complements the Second Industrial Master Plan(IMP2) 1996-2005

Inter-firm linkages and synergies in industryclusters assume important roles in deepeningthe industrial structure

Broad based programmes

Market DevelopmentTechnology DevelopmentICT for SMEsHuman Resource and Skills DevelopmentOutreach programmes

New initiatives introduced

Establishment of SME Information and Advisory CentreHeadstart 500 programmeEstablishment of SME Expert Advisory Panel (SEAP)

Targetted priority industry sectors

Primary ClustersElectrical and electronicsTransport equipmentWood-basedMachinery and engineering services

Secondary Focus GroupFood processingRubber-basedTextiles and apparelTraditional medicine and herbals

Basic issues in SME development

• access to market

• low technological capability

• lack of knowledge and information

• lack of labour and shortage of skilled manpower

• limited access to finance and capital

Challenges faced by SMEsSMEs are confronted with challenges arising from:

- Intensified global competition

- Increasing factor costs and effect on export competitiveness

- Geo-political uncertainties

- New emerging technologies and ICT development

Increasing global competition

• Increase in multilateral & regional trade as well as the liberalisation of investment policies

Easy access to marketGreater competition among local producers

• WTO negotiations to reduce tariff & trade barriers

• Full implementation of AFTA

• Bilateral Free Trade Agreements (FTAs)

• Competition from China

Changing export competitiveness ..

• To compete, SMEs need to achieve economies of scale focussed on supplying to international markets

• Policy-driven industries such as the automotive industry is increasing being challenged

• SMEs are encouraged to undertake joint-ventures with foreign companies

Geo-political uncertainties …• Development in political and social arena:

- SARS

- War

- Monetary and financial crisis

- Terrorism

Emergence of new technologies

• Global benchmarking of local companies to develop capacity to utilise and adopt new technologies

• Emergence of new technologies will affect: Productivity growth Economic competitiveness

• Increase usage of ICT ~ business efficiency ~ big companies can get supply through

multi-sourcing~ decreased cost of production ~ companies more innovative

• To achieve the competitive edge

• Adoption of new approaches and technologies that are vailable through ICT helps companies to capitalise on available business opportunities

• Create Efficiencies

• Improve Customer Service

• Reduce Operational Cost

Global Trends in the Manufacturing Sector…..

Global outsourcingStandardisation of parts & componentsEnhancing innovation capacitySupply chain management BrandingContinued technology advancement inminiaturisationMeeting customer requirement

GRANTGRANT SOFT LOANSOFT LOANSOFT LOAN PACKAGE FOR SMEs

SOFT LOAN SCHEME FOR FACTORY RELOCATION

SOFT LOAN FOR ICT ADOPTION

INDUSTRIAL TECHNICAL ASSISTANCE FUND (ITAF)

FACTORY AUDITING

ROSETTANET

PROGRAMMESPROGRAMMES

• Y2K GRANT• Established in Nov 1998• USD 14,000 per company or 30% which ever is

lower• Allocated USD 2.6 million

• E-COMMERCE GRANT• Established in July 2000• USD 2,600 per company or 70% which ever is

lower• Allocated USD 3.4 million• Fully subscribed in June 2002

In January 2004, these grant schemes were converted into Soft Loan For ICT Adoption.

Form of assistance given are :

- Minimum loan is USD 5,300 and maximum loan is USD 65,800 ;

- Interest rates are at 3% per annum ;

- Refinancing is not allowed ;

- Repayment period up to 5 years ; and

- The processing of application for this loan is by Malaysian Industrial Development Finance Berhad (MIDF).

The scheme provides assistance to SMEs:To purchase of design software (CAD, CAM, CAE) or subscription fee/licence fee for on-line engineering design services;

Purchase of computer hardware and related equipment;

Training cost.

The Scheme provides assistance to SMEs to use Information and Communication Technology (ICT) to improve competitiveness, efficiency and productivity.

Purchase of ERP software or first year subscription to on-line ERP system, or other similar software (CIM, ERM, MRP, SCM, CRM);

Implementation cost including system study, customisation and training;

Purchase of server and related networking equipment.

Form of AssistanceMaximum of USD 65,800 Minimum Loan – USD 5,300Repayment period up to 5 yearsRefinancing is not allowed

Interest Rate3.0% p.a

Implementing Agency :Malaysian Industrial Development Finance Berhad (MIDF)

The Scheme provides assistance to local Electrical and Electronic (E&E) companies:

To implement RosettaNet , an internet based common messaging standard for global supply chain management;

Enables companies in the supply chain to communicate and conduct business electronically through common codes sourcing of parts and components;

Acquisition of RosettaNet Middleware which include software, hardware and licensing fee to embrace global supply chain management system.

Form of Assistance: Grant not exceeding RM100,000 per company or 50% of approved project costs, whichever is lower.

• ROSETTANET GRANT– An Internet based common messaging standard

for global supply chain manegement– Enables companies in the supply chain to

communicate and conduct business electronically through common codes for sourcing of parts and components

– For local companies in E&E sector or E&E related services

– Two available models are :i) Enterprise Model ii) ASP Model

Funding For Enterprise Model

- 50% matching grant with the remainder of the costs to be borne by the applicant

- Maximum grant per company is USD 36,000

- Funding is not provided for expenses eligible to be claimed from other government grant schemes

Funding For ASP Model

- For SMEs : 70% grant with the remainder of the costs to be borne by the applicant

- For Large Companies : 50% grant with the remainder of the costs to be borne by the applicant

- Maximum grant per company is USD 8,000

- Funding is not provided for expenses eligible to be claimed from other government grant schemes

The Skills Upgrading Programme is aimed at enhancing the skills and capabilities of employees of SMEs in the technical and managerial levels, particularly in critical areas such as the electrical and electronics, information technology, industrial design and engineering fields.

Currently SMIDEC has appointed 19 training Providers to undertake technical skills training for SMEs.

Graduate Reskilling Scheme

Objective is to address issue of lack ICT Personnel in manufacturing sector.

As a part of solution for unemployed graduate to enhance knowledge and skills.

Skills Enhancement Programs includes :- Global Supplier Programs- Information Technology (MCSE, CCNA)- Technical Programs- Management Programs

(As at Disember 2003)

• E-Manufacturing Grant Scheme :Approved – USD 4.2 million to 181 companies

• Engineering Design Grant Scheme :Approved – USD 2.8 million to 183 companies

• RosettaNet Grant Scheme :Approved – USD 370,000 to 16 companies

The establishment of the SME Information and AdvisoryCentre was aimed at facilitating relevant informationaccess to SMEs in order to improve their businessoperations. The Centre comprised of:

Virtual Centre (www.smidec.gov.my); Physical Centres (Regional Offices); and Toll-free Line (1-800-18-1801)

The Virtual Centre, launched at “SMIDEX 2003” in July 2003provides on-line information for SMEs on:

Programmes; Financial Assistance; Incentives; and Related events

The Physical Centres information and consultation to SMEs through Business Clinics.

Number of companies attended the Business Clinic Sessions

Year 2002 2003 % increased Visitors 593 1,109 87

Business Clinics are conducted at:

Head Quarters (Central Region)

Penang (Northern Region);

Johor Bahru (Southern Region);

Kuantan (Eastern Region); and

Kuching (Sabah/Sarawak)

As an alternative to reach out to more SMEs, SMIDEChad established a Toll Free Line in July 2003. Enquiries managed by officers in Advisory Servicesand Technical Support Division. Enquiries mainly focused on:

• Financial assistance schemes. • SME Development Programmes. • Services provided by SMIDEC.

BENCHMARKINGThe Definition

Benchmarking is a systematic and continuousBenchmarking is a systematic and continuousprocess of searching, learning, adapting and process of searching, learning, adapting and implementing the best practices from within the implementing the best practices from within the Same organization or from other organizations Same organization or from other organizations towards attaining superior performance.towards attaining superior performance.

WHAT IS A BENCHMARK

A reference of excellence level of A reference of excellence level of performanceperformance

Example:Example:-- customer retention rate 98%customer retention rate 98%-- % of expenditure on training 10%% of expenditure on training 10%

Benchmark ?Benchmark ?What is a What is a

Definition of i-e-Benchmark

A web-based hub to enable community members to have a win-win situationin communicating their scores and identifying benchmark.

Benefits of e-benchmark

Able to speed up process of bench-measuring

Able to view real-time report, trends in performance of own organization versus the competitive scores of the other members

Able to key in data and edit data at own convenience through Internet Explorer( with password)

Able to to identify gaps in performance (ranking)

Confidentiality- companies are coded

Community of Practice (CoP)

CoP is a small group of people who comes together

to explore opportunities for best practices sharing

on common interest areas

Enterprise 50 ASEAN SMEs

Headstart 500Grant recipients

Community & Cluster Classification

No. of Employees

SMEs

Industry Type

Community

Sales Turnover

Cluster

Sub-group of Clusters

Mfg ICT Logistics/transportation

Community Concept

1st Tier Community

Textiles

Cluster

Services1st Tier :

HotelsIndustries

(Manufacturing)

Govt. Depts. ,Local Govt &

Agencies

e.g. Spinning, weaving

Cluster

Public Sector

Cluster e.g. SMIDEC, NPCeg 5-Star, 3-Star

hotels

International Networks/PartneringAsian Productivity Organisation ( APO) Network

Global Benchmarking Network (GBN)

The Benchmarking Network (TBE)

APQC

Project Management (Bruce Searles, Australia)

Fraunhofer Institute,Berlin

Winning Moves, UK (BenchmarkIndex Database)

European Commission, Brussels

Fichtner Group, Stuttgart

Centre for Inter-firm Comparison (CIFC), Winchester, UK

Robert Mann (Jabez Holdings, Australia)

701D, Level 7, Tower D, Uptown 5,No.5 Jalan SS21/39Damansara Utama

47400 Petaling JayaSelangor

MALAYSIATel. No. 603 – 7628 7400Fax No.: 603 - 7660 1919

Email : info@smidec.gov.myhttp://www.smidec.gov.my

Toll Free Line : 1-800-18-1801