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Lean Manufacturing (DC-MSME)

The Scheme is basically a business initiative to reduce “waste” in manufacturing.


The basic rationale of the Government support to MSMEs for undertaking lean manufacturing (LM) is to enhance their productivity and competitiveness by reduction of wastages in manufacturing processes, inventory management, space management, energy consumption, etc. The LM techniques also result in reduction in rejection, standardization of processes, better layout of machines resulting in reduced transportation of products during manufacturing, etc. The implementation of LM techniques leads to cost reduction for MSMEs. It also has lot of social benefits in terms of training of labour, creation of knowledge, increased labour productivity, lower input costs to other industries, introduction of new production equipment/ methods in manufacturing and development of work culture in society.
The implementation of lean manufacturing technologies in the enterprises will lead to increasing return to scale, i.e. (i) economy of scale that reduce per unit production cost and (ii) increased productivity of the enterprises (iii) enhanced competitiveness in domestic and overseas markets. Simultaneously it also leads to increased expertise in the firm in respect of better work culture, managerial competencies, etc. The scheme also leads to demonstration effect.


Ever changing globalized environment has been posing challenges of competitiveness and survival to all the constituents of the economy. It has been more so for MSMEs in the manufacturing sector. It has been noticed that units are so engaged in their day-today management issues that they don‟t have time and resources to dedicate for a strategic understanding of the need and acquiring means of various techniques which would help them in enhancing their productivity and hence being competitive in the world markets. Lean Manufacturing is a set of techniques, which have evolved over a long period and are based on various minor to major breakthroughs that help in reducing cost and hence increase productivity and competitiveness. A list of main LM techniques with brief description of each is given below:

  • 5S Syst em: The 5S systems is a workplace management which helps in getting the “junk” out of the work area and set of procedures to keep it that way. 5S stands for Sort, Set in order, Shine, Standardize & Sustain.
  • Visual Con trol: Visual controls such as cartoons, charts, light signals, Lane marking on floor, Safety instructions, Warning signs, Poka-Yoke instructions etc., can be displayed all over the work place.
  • Standard O perating Procedures (SOPs): All verbal instructions should be converted to SOPs to remove dependency on skilled personnel in achieving required product quality level, consistency, effectiveness and efficiency.
  • Just in Time (JIT): It’s a Japanese manufacturing philosophy to make the right product in right quantity at the right time. This almost results in zero inventory and shortest possible cycle time.
  • KANBAN System: In this, components are pulled by assembly or subsequent work centers and the containers are replenished with the right quantities by the previous work center, which reduces the inventory of unwanted components.
  • Cellular Layout: In this improved manufacturing system, family wise component completion is aimed at within the smaller self contained cell, which is a part of a big factory, as compared to operation wise completion in traditional functional layout.
  • Value Stream Mapping: It covers all activities, both value added and non-value added, and helps in arriving at best layout of all resources required for making the product.
  • Poka Yoke or Mistake Proofing: It is again a Japanese technique used to prevent errors occurring at their source of origin, and it finally leads to a „Zero Defect‟ situation.
  • Single Minutes Exchange of Dies or Quick Changeover (SMED): Applying ingenious methods, set up time is minimized and brought to less than ten minutes; thereby smaller batches as required by the customer can be taken up for manufacturing.
  • TPM (Total Prod uctive Maintenance): TPM involves operators, maintenance staff and management working together to improve overall operation of any equipment. Operators, who first identify noisy or vibrating motors, oil or air leaks, can be trained to make simple repairs to prevent major and costly break downs.
  • Kaizen Blitz or Ra pid Improvement Process:It is an intense management programme, which results in immediate change and bottom line improvement. Both management staff and workers are involved in this.

Nature of assistance

Financial assistance is provided for implementation of lean manufacturing techniques, primarily the cost of lean manufacturing consultant (80% by GoI and 20% by beneficiaries). Lean manufacturing consultants (LMCs) will raise bills for services provided to Special Purpose Vehicle (SPV). SPV will, in turn, pay the first installment of 20% to the LMC and will obtain reimbursement from the NMIU. Thereafter, Ministry of MSME will transfer funds to the NMIU. SPV payments to LMC will be on a milestone basis in 5 tranches, each of 20% of the amount fixed.

Who can apply

The scheme is open to all manufacturing MSEs. The units are required to form MC, ideally of 10 units each with a minimum 6, by signing among themselves a Memorandum of Understanding an MoU to participate in the scheme.

How to apply

A group of SMEs can apply for the scheme. Either a recognised SPV can apply on its own, or a mini cluster can be formed by a group of 10 or more such units.

The SPV can apply to the National Monitoring and Implementing Unit (National Productivity Council for the Scheme) in the given format.

Implementation Arrangements

The scheme will be implemented in mini clusters spread all over the country for all manufacturing sectors. The Scheme will be implemented by National Monitoring and Implementing Units (NMIUs), under the overall directions of DC (MSME). It is expected that once MSMEs are introduced to the benefits and savings that accrue from LM techniques, they would themselves continue the Scheme at their own expense. The Scheme will be implemented in 500 clusters spread all over the country during the 12th Plan period. To ensure effective and successful implementation of LMCS, need based awareness program(s) will be organized so that the potential participants may assimilate the scheme provisions and only likeminded entrepreneurs join together for effective implementation of the scheme. However for organizing more than 2 awareness programmes in a cluster, approval of SSC will be required. 4.2 A three tier structure has been proposed in the Scheme. A Mini Cluster (MC) would be formed at the lowest tier. The units of the MC would work with the assigned LMC to implement the specific Page 6 of 19 LM Techniques. The next higher level tier, National Monitoring and Implementing Units (NMIUs) will be responsible for facilitating, implementation and monitoring of the scheme. At the highest level, SSC will provide overall direction to the Scheme and will be headed by the Development Commissioner (MSME).

  • Mini-Cluster is a group of preferably 10 MSMEs (minimum 6 units) located within an identifiable and as far as practicable, contiguous area and manufacturing same/similar products.
  • National Monitoring and Implementing Unit (NMIU) will be responsible for facilitating, implementation and monitoring of the scheme. It will monitor every stage of the programme on behalf of the Development Commissioner (MSME). The field level office/ project offices of the NMIU will function as Implementing Agency (IA) for implementation of the projects.
  • SSC will have overall responsibility for policy formulation, Scheme implementation and monitoring. It will be empowered to take all key decisions related to the Scheme and to approve minor modifications / procedural changes in the guidelines for operational expediency. SSC would deliberate on the issues put up by NMIU. It would lay down the detailed implementation strategy for the NMIU.


The Scheme is open to all Micro, Small and Medium Manufacturing Enterprises throughout the country. The units should be registered with DIC (EM-II) or with any other agency (Professional body, association, Govt agency, department, etc). The units are required to form a MC ideally of 10 units (minimum 6) by signing among themselves a Memorandum of Understanding (MoU) (Annexure 1) to participate in the Scheme.

Guidelines for filling application


  • Upload MoU (As per scheme guidelines, Annexure-1)
  • Upload Power of Attorney (As per scheme guidelines, Annexure-2)
  • Upload copy of SPV Registration / DP6 resolution (as applicable)

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