Benefits of information technology for small and medium-sized enterprises in the manufacturing industry

Abstract

Small and medium-sized enterprises (SMEs) play a critical part in an economy, driving growth and creating jobs. SMEs are even more vital for developing countries since they are effective tools for poverty alleviation. However, despite their importance to the economy, SMEs are faced with a variety of obstacles such as financial challenges, tax rates, competition, a lack of knowledge, and high operational costs, among others. Accounting for 8% of the SMEs in South Africa, contributing 25% of total SME turnover, and accounting for 20% of the employment cost associated with SMEs, manufacturing proves to be a key industry for SMEs. Changes in the manufacturing industry for SMEs are inevitable, especially since the competitive nature of the manufacturing industry is based on low input cost in terms of material, labour and additional resources and high-volume output in terms of product manufacturing. Many SMEs in the manufacturing industry have realised the importance of innovation and product development to sustain long-term competitiveness and profitability. Technologies may hold many benefits for manufacturing companies in particular; however, management might be unaware of what these benefits entail. While SMEs in the manufacturing industry may gain tremendous benefits from incorporating IT, they must ensure that the resources available to them are leveraged to obtain the maximum value for the resources sacrificed for the investment in new technology. Therefore, thorough examination prior to investment is imperative. The value for money performance measurement tool can assist SMEs in the manufacturing industry in determining the benefits of investing in technology in terms of efficiency (speed of production), economy (cost of production) and effectiveness (quality of production).