In Gurgaon, companies are cutting out vendors & directly approaching MSMEs for work orders

To enhance income and sustained business in the falling rupee scenario, the micro and small units based in Gurgaon have started approaching its end users directly than to go through vendors. This shift from business to business (B2B) channel to business to customer (B2C) channel is helping them to enhance their profitability by around 4 to 5 per cent which was initially eaten by their business channel partner who used to work as a bridge between them and the end user company. 

Vikas Jain, president, 
Gurgaon Chamber of Commerce and Industry said, "Gurgaon is a hub of micro and small sized companies working for larger units dealing in auto ancillary, food processing, health, garments, etc. There are two types of vendors- one who works directly for the giant company (B2C channel), other, who work for the vendors, who work directly for the giant company (B2B channel)." Jain said that the profit margin which is being galloped by the vendor existing in B2C channel is around 8 per cent in the region and due to the falling rupee and other concerns, the micro vendors have decided to go to clients directly." 

Chandresh Jajoo, managing director, 
Hema Engineering Industries, a leading auto sector unit in Gurgaon, which has been in operations since 1984, said, "Due to the falling rupee, even giant players have started feeling the heat and it has put the small vendors inside the barbecue." Elaborating on his perseverance Jajoo said, "Generally, a giant unit would outsource its bulk of work to a larger vendor and the larger vendor would further outsource its assignment to it tier-2 and tier-3 city based vendors. With the falling rupee, giant units have started asking for discount from its vendors, who in turn are asking a discount from the small players." 

However, he said that giant units are well informed about the practice but for their convenience to deal with lesser number of vendors, they generally ignore entertaining the micro sized vendors. 

Aseem Takyar, proprietor, Armaan Auto Components said, "Today, a company like Maruti is looking at all kinds of avenues to save its revenue. Its decision to outsource its assignments to the local vendors which it used to import should be seen in this regard." Takyar said that giant players are well aware about the product(s), which they use. Since, a profit margin of around 8 per cent is getting eaten by their B2C channel partner. They have started approaching the small companies who are in the B2B channel of its vendors. In return, the small units are getting extra money which is around 4 per cent to 5 per cent while the giant player is also been able to get around 3 per cent to 4 per cent profit margin.

"This practice has become a blessing in disguise for the micro sized vendors who are under extreme pressure to sustain as they have been squeezed by their B2B channel partner and in falling profitability scenario, their sustainability had come under question," said Takyar. 

Chand Anand, president of All India Garment Exporters Guild said, "The practice needs to be continued even when the 
rupee gains lost ground. MSMEs are the backbone of any giant unit's success and if a giant is able to manage its dealings with an MSME during adverse economic conditionsm they should continue business during better conditions so that the MSMEs become an equal partner in all conditions." 

Standing in sync with the views of Chand Anand; SK Ahuja, Secretary General of the
Gurgaon Chamber of commerce and Industry said, "Today, the profit margin of MSMEs have reached around 7 per cent to 8 per cent which is lesser than the fixed deposit returns that any bank would give on their investment. If they continue the same practice in better business mileu then the MSMEs would be able to log around 12 per cent to 14 per cent profit which will give them sustainability and some back up against the heat which the entire economy is facing these days.