The Chemical Engineer in Development: understanding the challenges of implementing technical solutions “under MSME conditions” Naomi Cossette R. Luis*, Sheila L. Oberio Department of Science and Technology Regional Office VI, Iloilo City *
[email protected] Abstract - Chemical engineers enter development work by assisting micro-, small and medium enterprises (MSME) in addressing problems on waste management, food safety, and productivity improvement, among others. Having gained expertise either from the industry or the academe, most practitioners expect a seamless integration into development work; the primary assumption being hinged on their aptitude in unit conversion: from tons to kilos, and from industrial- to the micro-scale level. Experience indicates otherwise. In this domain where effectiveness more than efficiency takes greater merit, and transactional cost is more a factor of interpersonal relations rather than technical competence, chemical engineers may benefit from understanding development economics. This paper explains the natural affinity that chemical engineers have towards innovation-driven development work, the competencies that are required to create added value to MSME operations, and the challenges of creating a significant impact in an economist-defined world. Keywords: economics; development; MSME
I. INTRODUCTION Micro-, small-, and medium-scale enterprises, or MSMEs are characterized as enterprises with asset size below PHP100M, have less than 200 individual workers, and accounts approximately to 99.6% of the business enterprises in the country. In 2010, there were 774,664 MSMEs in the country. More than 91.6% of these are in the micro-scale and based on the same figure, 12.5% are into manufacturing. MSMEs are credited for providing employment opportunities in the area where they are located and for spurring investments in the countryside. Despite their sheer number, MSMEs contribute only about 36% of the country’s gross domestic product (GDP).
assistance on packaging and labeling, and testing services to name a few. Under the SETUP ISSF, MSMEs were encouraged to adopt innovations to improve the quality of their products, develop new products or product variants, and increase their productive capacity. In view of the limited government resources, MSMEs that apply for assistance are assessed on their readiness to acquire new technologies and implement new systems. The DOST developed a technology needs assessment (TNA) protocol to identify the technology gaps of the firm and the potential technological interventions. The TNA
This low contribution of MSMEs to the GDP is not unique to the Philippines. MSMEs worldwide had been found to face the same constraints to growth and development, among which are the lack of access to finance, low productive capacity, lack of appropriate equipment and facilities, and inconsistent product quality.
When a DOST office receives a letter of interest from a potential client, the office deploys trained personnel to conduct a TNA. The TNA is an integral step in the ISSF evaluation process as it is used to establish the “technology status of [the] selected core business functions and management systems” of the enterprise.
Romer refers to these development constraints as object gaps and idea gaps. Object gaps refer to the lack of the necessary infrastructure and equipment and idea gaps refer to the lack of knowledge and skills for the optimal use of resources.
These core business functions and management systems are as follows: strategic direction, management aspect, technical aspect, marketing aspect, supply chain and logistical practices, and financial aspect.
The DOST SETUP Innovation System Support Fund National government agencies such as the Department of Trade and Industry (DTI), the Department of Agriculture (DA), the Department of Labor and Employment (DOLE), and local government units (LGU), implement programs to encourage the growth and development of MSMEs. The Department of Science and Technology likewise implements programs to support MSMEs through the Small Enterprise Technology Upgrading Program (SETUP). The program has various components, the most significant among which is the Innovation System Support Fund (ISSF), a unique financial support facility that allows the MSMEs to acquire equipment and adopt technologies on a mutually acceptable refund scheme. MSMEs that avail of assistance under the SETUP ISSF receive a range of assistance that includes the introduction of appropriate technologies, activities towards human resource development,
Fig. 1. The six components that were evaluated during the conduct of a technology needs assessment This paper intends to provide an overview of the extent of documentation and practices observed in selected micro-, and small enterprises in Iloilo City. It aims to illustrate the conditions existing in these enterprises so that the readers may see the potential contributions of the chemical engineering profession
towards national development. It seeks to encourage discussion on the application of chemical engineering principles to micro-and small-scale enterprises to widen the scope of chemical engineering practice and to make the discipline relevant to all enterprise levels.
II. EXPERIMENTAL
Most of the assessed firms have relatively weak documentation with an average documentation rating of less than three, indicating that in most firms, there were attempts at documentation, but these was not consistently implemented. Table. 2. Average result of the TNA summary report
The study is limited to the MSMEs in the province and city of Iloilo that underwent technology needs assessment for the period 2012-2013. There were 23 firms evaluated during this period. During this time, the DOST Iloilo Office developed and implemented a descriptive rating system to assess the documentation and the practice of activities observed during the TNA. The firm was rated on each of the six business core functions. The rating system used numerical values ranging from 1 to 5, with 1 as the lowest and 5 as the highest. The rating was done during the conduct of the TNA Table. 1. Rating system adopted to assess the level of documentation and the practice of relevant activities of the MSME
The highest average rating for a firm relative to its practice of relevant activities is 3.52. The firm with highest average rating on practice also showed the highest average rating on documentation. The correlation regarding the extent of documentation and the practice of relevant activities however was not determined in this paper. Core Business Components
The DOST Iloilo personnel prepared a TNA summary report that showed how each firm rated on two areas: the extent of documentation and their practice of relevant activities. For example, one firm is rated (between 1 to 5, where 1 is the lowest) on the extent of its documentation on the aspect of strategic direction. It is again rated (between 1 to 5, where 1 is the lowest) on their practice of activities relevant to strategic direction.
Fig. 3. Chart showing the extent of documentation and practice of the assessed firms on the six business components
Ratings were given on the other five aspects as well. If an aspect has several sub-components, the average rating was determined for that particular aspect. A radar chart was chosen to illustrate how these different variables were observed in the enterprises.
III. RESULTS AND DISCUSSION Of the 23 firms that were assessed, 12 firms (52%) were smallscale, 8 firms (35%) were micro-scale, and 3 firms (13%) were medium-scale. Most of the assessed firms belong to the food processing sector (65%). The other sectors included furniture; gifts, decors, and handicrafts; aquatic and marine; agriculture; and metals and engineering.
Fig. 4. Chart showing the average rating of all firms on the six components
III. 1. Strategic Direction Strategic direction refers to the following areas: vision, mission, and values; plans; policy for technology adoption; direction setting, strategic alliances, current agreements. Documentation on the strategic direction ranged from very weak to weak. This average value indicates that documentation was not evident in most of the firms but management expressed the need to document. In some firms, documentation was evident but not consistently implemented. On the practical side, most of the firms did exhibit the presence of a system or made slight efforts to implement related activities but this practice was not consistently implemented. Chemical engineers who provide consulting services to MSMEs should be able to impart successfully the importance of proper documentation. Strategic planning is part of project management and may not be entirely a new concept for chemical engineers. It may be necessary for chemical engineers to be conversant with strategic planning in order assist the firm in this aspect. III. 2. Management Aspect Management aspect covers human resource management; purchasing; structures and facilities management and maintenance; public and media relations; and business ethics and social responsibility. On the average, practical implementation ranged from weak to moderate. Some firms were implementing a system but were not consistent with the practice. Other firms consistently implemented their established system but these systems needed some improvement. The average rating for documentation ranged from very weak to weak. In large-scale operations where systems are already in place, the level of documentation is extensive enough to ensure consistent implementation. III. 3. Technical Aspect The technical aspect refers to three major areas: operational and outsourcing practices; product and process performance and improvement; and waste management. Operational and outsourcing practices focuses on products and raw materials; the production system; production planning and control; plant location and production layout; equipment management and maintenance; and quality assurance system.
firms. The implementation may not be consistent in some firms. In other, implementation may be consistent but the system needs improvement. The chemical engineering education emphasizes systemic thinking and this discipline is at the core of the professional subjects such as chemical engineering calculations, unit operations, plant design, instrumentation and process control, and chemical process industries, among others. Chemical engineers who work with MSMEs whether as consultants or trainers will need to come up with alternative methods of acquiring information. In the food processing sector for instance, most owners do not maintain records of the production volume, which is a critical factor to determine the productivity level. The consultant may instead ask for the quantity of raw materials that were purchased for the period, i.e., sacks (or kilograms) of flour or sugar purchased, or the quantity of meat used per batch. This difficulty may have stemmed on the fact that MSMEs produce a wide assortment of products that make inventory challenging. In this area, the chemical engineers’ training on mass balance will become handy. III. 4. Marketing Aspect The marketing aspect covers the key factors of marketing – product, price, place, promotion; SWOT analysis on marketing; customer satisfaction; creativity and innovation; and e-commerce. Documentation of the marketing aspect ranges from very weak to weak. Practice on the other hand, ranges from weak to moderate indicating that in this aspect, most of the firms have systems in place. In some firms, the system is not consistently implemented. In others, the system, although consistently implemented, needed improvement. Marketing is not an aspect that most chemical engineers consider. The chemical engineer is academically prepared to increase the efficiency of an operation. This may be due to the frequent assumption that professionals work in large industrial operations in which the division of work is sharply defined. Chemical engineers who work with MSMEs will need to look at the environment within which the enterprise operates. A common mistake is to create a technology-rich product or service that has no identified buyers. When developing products, it is imperative to first identify the target market, survey what the market needs, and then develop the product. III. 5. Supply Chain and Logistical Practices
Product and process performance and improvement refers to the performance measures and results of the process; the performance measures and results of the product; and product quality standards.
This involves the determination of the supply chain, delivery service, and business clusters.
Waste management refers to waste disposal; and cleaner production technologies.
In practice, firms showed a moderate to strong rating. This means that in most cases, a system on supply chain and logistical practices was evident, consistently implemented and effective.
Documentation average ranged from very weak to weak. This shows that most firms have no existing documentation although they expressed the need to document. In some firms, documentation is evident but not consistently implemented. The average rating on practice in the technical aspect ranged from weak to moderate. This indicate that a system is evident in the
Documentation rating remained very weak to weak. In most cases, documentation is evident but not consistently implemented.
This indicates that the assessed firms had already looked at their supply chain and how their products move from the manufacturing location to their customer. Chemical engineers may need to be familiar with the value chain concept and to consider logistics when they assist MSMEs. It is important to be able to determine the most effective and efficient manner of transporting products to ensure that these products reach the customers at optimum quality. Knowledge on transport packaging and food safety (for processed products may come in useful. III. 6. Financial Aspect
Mechanical engineers gravitate towards pumps and engines. In some instances, their practice may intersect with that of chemical engineering. But mechanical engineers have not acquired the knowledge and skill to establish mass and energy balances or to understand the principles that govern unit processes and operations, nor the appreciation of transport phenomena and physical chemistry. The competence to establish the manufacturing system is still the domain of chemical engineering notwithstanding the size or magnitude of the operations. There is a dearth of discussion on the application of chemical engineering principles on the scale of MSMEs. Chemical engineers also need to institutionalize unit operations terminologies and standardize the terms used even at the level of MSMEs.
This refers to the financial approaches that the firms adopted. To date, the profession has yet to rise to the occasion. This is the area that most firms practice and document. During the interview, this is due to the desire of the owner to control expenses versus the perceived “net” profit.
Chemical engineers should take the lead in manufacturing operations across all industrial scale. A prevalent thinking on the practice of ChE practice is that it is only for large scale industries.
In practice, the firm ratings ranged from moderate to strong. This indicates that the firms either have a system in place, the system is consistently implemented but needs improvement; or that the system is evident, consistently implemented and is effective.
The challenge may lie on the scale of operations that chemical engineers are familiar with. There is no argument on the value of prioritizing the needs of large scale industries and generating knowledge in this direction. Economic considerations dictate such. On the other hand, it may be worthy to study as well the process involved in small-scale operations and to share knowledge on this area. The same unit processes and unit operations principles are involved albeit on a smaller, micro-scale.
The high rating on this component indicates that firms applying for SETUP ISSF assistance are already aware of the need to monitor their financial performance. Financial statements give an overview of the financial health of the firm. It shows which areas the firm spends on and whether a prospective investment may result to favorable returns. The purpose of assisting MSMEs is to increase their productivity for them to increase their income. Chemical engineers assisting MSMEs will need to be adept on reading financial statements to be effective consultants and change agents.
IV. CONCLUSION Chemical engineers have the potential to become active contributors to economic development and at the same time, carve a niche that will mark the relevance of chemical engineering not just in the industrial setting but especially in the seemingly unremarkable operations of the MSMEs. There is much that the profession can do in this arena for this is a frontier that chemical engineers can do best. Working directly with MSMEs may allow the seemingly esoteric world of chemical engineering to be anchored into the community. This is likewise an opportunity for the public to comprehend the scope of the chemical engineering discipline. It is not unusual for chemical engineers to be mistaken for chemists; the latter being more recognizable for having successfully defined the environment where they work. In a similar manner, chemical engineers are perceived to be second choice to food technologists in the food processing industry due perhaps to the need of MSMEs to develop new products or product variants. Food technologist create formulations for the product and establish the product quality.
Development work is a new frontier for chemical engineers. Practitioners can apply chemical engineering principles and technologies in the premises of the MSMEs.
V. ACKNOWLEDGEMENT The authors are grateful for the assistance provided by the DOST Iloilo staff and to the DOST VI Regional Office for allowing the use of information in the TNA report. The authors likewise express their appreciation to the chemical engineers in Iloilo who have shared their experience in working with MSMEs.
VI. REFERENCES [1]. W. Booth, G.G. Colomb, J.M. Williams, The Craft of Research, The University of Chicago Press, (2008) [2]. I.J.M. de Vera, An Assessment of Micro, Small and Medium Enterprises That Underwent UP ISSI’s Integrated Plant Survey for the Period 2006 to 2011, Procedia Economics and Finance 4 (2012) 350-364 [3]. DOST AO 002, Small Enterprise Technology Upgrading Program (SETUP) Guidelines. (2015) [4]. P. Romer, Idea gaps and object gaps in economic development, J. Monetary Economics 32 (1993) 543-573.
