Problems faced by Ancillary Units :
- Variation in demand –
Immediate problem faced by ancillary unit is their vulnerability to variation in demand. When the large scale manufacturer producing an end product faces slackness in demand, the ancillary units supplying the components is hit hard & may have to remain practically ideal until the demand for the end product revives.
- No alternative outlet –
The production apparatus in the ancillary unit is highly specialized & tailored to meet the requirement of a particular assembly. It is therefore not possible to switch over to any other items without incurring losses on account of machinery installed. Therefore an ancillary unit is a captive unit without alternative outlet.
- Financial squeeze-
During the times of financial problems, there is a tendency on the part of the parent firms to squeeze the ancillary units by giving themselves the credit to non payment of bills. Therefore the ancillary units are in a more vulnerable position than small – scale industrial units.
- Dependency on large – scale units –
In India, the ancillary unit lean too heavily on large scale units. This dependence may be unavoidable in the initial stages of development but the ancillary is able to stand on its own aftertime which will stop.