Thursday, 21 February 2013

How SMEs can jump productivity hurdle

By Tan Khay Boon, Published TODAY, 19 Feb 2013

Small and Medium Enterprises (SMEs) form the backbone of an economy as they contribute a large proportion of the GDP and employ the largest number of workers in the economy. Yet when encountered with a major policy shift, they are also the most vulnerable party.

The tightening of the foreign labour inflow in Singapore hit SMEs hardest. Unlike multinational corporations (MNCs), SMEs do not have the financial muscle to offer high wages or invest in sophisticated technology, nor the flexibility to relocate production elsewhere.

In spite of the tax and other incentives offered by the Government to boost labour productivity, the response of SMEs has been lukewarm.

This is understandable as SMEs are typically already overwhelmed with the day-to-day operational challenges and do not have the time nor resources to tackle the long-term productivity issue.

More concerned with the pressing issue of high business costs, some SMEs have requested the Government to delay further increases in the foreign workers’ levies and to remove S-Pass levies. But while there may be some tweaking of policy, the Government has made it very clear there will be no U-turn.

So, the old practice of bringing in more foreign workers to meet production targets is no longer feasible. This leaves increasing labour productivity as the only way to survive and grow. The million dollar question is — how?


Contrary to the belief that boosting productivity is costly, some forms of productivity enhancement are achievable at a reasonable cost, yet the long-term benefits can be tremendous. The critical factor is a mindset that is receptive to changes in the work process.

SMEs may begin with scrutinising the workflow and identifying processes which can be redesigned so that scarce labour resources can be focused on higher value-added activities. The IT revolution has led to the invention of much hardware and software that can help firms be more efficient in managing information.

For instance, in the healthcare industry, the kiosks at Woodlands Polyclinic for patients to enter their health information prior to seeing doctors have resulted in shorter waits. It also allows the doctors to spend quality time with patients on diagnosis and treatment.

In the education industry, the use of software such as Respondus at SIM Global Education has reduced the time taken to set up an online quiz — from four hours to just 30 minutes — so that instructors can focus on designing quality course materials.


As for the core activities in the work process, SMEs can explore better ways of performing these activities, such as through machinery or technology. An investment outlay is inevitable, but part of the cost may be reduced through the appropriate SPRING Singapore schemes as well as tax rebates. The long-term benefit lies in the reduction in manpower needed, which is a boon at a time of high labour cost.

In the hotel industry where personalised service is expected, lack of manpower is a major issue. The use of mechanical bed lifters and motorised trolleys at Rendezvous Grand Hotel makes it easier for housekeepers to make the bed and move the trolleys around. This not only saves time but also gives better protection to the senior workers in housekeeping.

The technology need not be a cutting edge one, as landscape firm Blooms & Greens can testify. It introduced a self-made automation system to water the plants at its 4-hectare nursery. The result is fewer workers and a shorter time needed to cover the same area.


Another source of efficiency can be obtained through economies of scale — making use of existing resources to produce slightly different products. One example is Golden Bridge Food Manufacturing, which initially focused on producing pork offerings such as Chinese waxed sausages, Taiwan sausages and pork floss, but later introduced halal canned luncheon meat to serve the Muslim market.

Having an innovative product ride on existing resources to serve a new market may be crucial for survival in a highly competitive industry.

Cost savings can arise from exploiting the economies of scale — that is, the reduction in costs with bulk purchase of inputs, economised storage space and transport equipment, the division of labour and utilisation of machinery, and so on.

Due to Singapore’s small domestic market, SMEs will have to consider exporting to reap the benefits of economies of scale.

In this respect, the Government can help them gain entry into foreign markets.

To support the more productive measures, workers must be trained and employers must be prepared to allow the workers time to undergo training. SMEs usually have a small training budget, but there is assistance available such as the Workforce Development Agency’s support scheme for Continuing Education and Training courses.

Suitable training courses can be designed through tie-ups with institutions and the Government can play a facilitator role. The latter can also support SMEs’ quest for productivity by providing more grants and vouchers, and by simplifying the application procedures.

Finally, creating a pleasant working environment helps to boost productivity. Remuneration apart, employers need to give their staff recognition to boost morale. Offering flexible working hours and opportunities to explore their potential can have a great impact in making employees more productive.

Dr Tan Khay Boon is a Senior Lecturer with SIM Global Education. This rounds up a series on productivity.


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