A Study of SME Cross-Border Trade Technology Gaps
The annual export and import of goods in India (excluding services) exceed USD 800 billion annually, which accounts for more than 30% of India’s GDP. SMEs account for more than 40% of this amount, or about USD 300 billion each year. More than half of this trade is with developed countries (US, EU, Japan, China, etc). In India, more than 30 million people are directly employed by SMEs involved in cross-border trade.
For SMEs, exports are particularly attractive because –
- High margins – Competitiveness due to lower labor costs and raw materials availability
- The most important aspect is a better track record of payment from overseas buyers, including easier access to credit insurance. Buyers from developed countries are far more disciplined when it comes to payment.
- GST benefit plus incentives (3% to 5%)
- Depreciation of the INR benefits
- Interest subvention on borrowings, Capital subsidies, Advance Authorisation (Import Duty waiver)
Over 14 million shipments cross India every year (by sea and air). From an SME perspective, there is little digital footprint or data consolidation associated with these shipments. Today, this is handled by laborious, paper-intensive, unorganized processes.
It takes about 60-75 days from start to finish to complete each shipment. India’s EXIM process is quite complex.
In addition to coordinating with overseas customers and suppliers, an SME has to deal with 10+ service providers for every shipment.
These ancillary activities cost between 10-12% of every shipment/invoice value. In total, Indian SMEs spend over USD 35 billion a year to obtain these ancillary services from various service providers. The following is an illustration of these costs for an FCL shipment.
The total overhead for this shipment (excluding manufacturing and manpower costs) is approximately USD 4,000. Additionally, the collective time spent on each shipment is at least 100 man-hours.
It is also necessary to catch up on government regulations, both local and international. There is surprisingly little or only piecemeal technology support for these webs of activities. Interestingly, India is not an exception and SMEs around the world suffer from the same inefficiencies. Although some digitization has taken place in India on the government side (DGFT, ICEGATE). However, the outcome is quite far from optimum.
In the past few years, SaaS companies and B2B start-ups have addressed many of the generic needs of SMEs, including GST, Accounting, e-Payments, and CRM. Unfortunately, no tools or solutions exist that simplify the lives of SME exporters and importers. Most custom ERPs used by SMEs are focused on accounting, inventory, HR, etc., not on the export/import workflow and digitization.
In larger companies, SAP extensions are deployed to their ERP solutions. As such, these solutions take months/years to install & stabilize, and such solutions are completely out of reach for SMEs due to the cost, time, effort, and uncertainty involved. An SME exporter/importer cannot digitize their export/import workflow with an off-the-shelf / cloud-based tool.
Due to this, teams from companies handling Export / Import rely on locally stored documents, cabinets full of hard copies, spreadsheet trackers, and proverbial emails without any system support or automation.
It is for this reason that many SMEs struggle to manage and/or expand their EXIM business effectively. Is there a better way of dealing with this?
Supply Ninjas’ team has used this opportunity to automate, digitize, and simplify the lives of SME exporters and importers through all in one platform Ninjas Pro.
Click here to know more about Ninjas Pro