Local content has now become a very hot topic in procurement departments. Most countries have made, or are making, local sourcing mandatory for companies in specified industries. But, what is local content? And why has it become such a hot issue?
Today, every country needs its people to capture the commanding heights of its economy and so assist to keep its wealth within its borders – as well as providing jobs to its ever-increasing population. Governments are increasingly looking beyond revenues they earn through economic rent. Their aim is to maximize national value creation by means of an industry value chain through employment, technology transfer and the acquisition of knowledge. It's all about capacity building, creating SMEs as well as offering products and services locally.
Local content means building a skilled workforce and creating a competitive supplier base. It involves the development of those local skills, technology transfer, and the use of local manpower and manufacturing. The rule of law, a skilled workforce, and an investment-friendly atmosphere are critical for enhancing local content. The procurement of local goods and services crucially establishes a multiplier for local economic development through contribution to employment, skills strengthening, supplier and local enterprise development.
1. Local SMEs are the drivers of economic activity
Especially in developing countries, local SMEs are the drivers of economic activity and development. While the technology gap between developed and developing countries is widening, the spread of local technologies in developing countries is being fast-tracked. Technological advancement also underpins the rise in incomes in developing countries, which has helped reduce poverty levels.
2. Local suppliers are more agile and responsive
Changes in the market necessitate supply chain adjustments. When sourcing abroad – dealing with high volume producers and extra time in shipments – those adjustments are slower to take effect. Local suppliers can make adjustments more quickly – they are more agile. By using locally produced goods you can also broaden your product lineup while simultaneously building closer relationships with your customers. There is a sense of pride when you go to the store and buy goods and products from suppliers you know or that are our in your own backyard. And that's before you take account of the good public relations generated from supporting the community around your business – demonstrating a desire to invest and build those around you. Companies should find a way to partner with local suppliers whenever possible.
3. Personal relationship with your supplier is a valuable asset
Finally, the personal connection can also be a tremendous asset. Being able to meet your supplier face to face provides a greater opportunity for personal connection and relationship building. When you truly know someone, in person, when they are not just a voice on the other end of the phone half way around the world, that personal touch comes into play. When your business has a crisis perhaps, or needs a sudden order because of a surprise deadline, the personal relationship with your supplier allows you to call them and ask a favor – one they will probably grant. Try doing that to a faceless person on the other side of the world and you may at best get a simple “I'm sorry, that's not possible.”
So, there are many benefits to local sourcing and content. Even if you've already looked and ruled out local suppliers, take another look. Think creatively and see if there is room for building local content into you sourcing strategy and if it can work better for your business.
Local content means building a skilled workforce and creating a competitive supplier base. It involves the development of those local skills, technology transfer, and the use of local manpower and manufacturing. The rule of law, a skilled workforce, and an investment-friendly atmosphere are critical for enhancing local content. The procurement of local goods and services crucially establishes a multiplier for local economic development through contribution to employment, skills strengthening, supplier and local enterprise development.
1. Local SMEs are the drivers of economic activity
Especially in developing countries, local SMEs are the drivers of economic activity and development. While the technology gap between developed and developing countries is widening, the spread of local technologies in developing countries is being fast-tracked. Technological advancement also underpins the rise in incomes in developing countries, which has helped reduce poverty levels.
2. Local suppliers are more agile and responsive
Changes in the market necessitate supply chain adjustments. When sourcing abroad – dealing with high volume producers and extra time in shipments – those adjustments are slower to take effect. Local suppliers can make adjustments more quickly – they are more agile. By using locally produced goods you can also broaden your product lineup while simultaneously building closer relationships with your customers. There is a sense of pride when you go to the store and buy goods and products from suppliers you know or that are our in your own backyard. And that's before you take account of the good public relations generated from supporting the community around your business – demonstrating a desire to invest and build those around you. Companies should find a way to partner with local suppliers whenever possible.
3. Personal relationship with your supplier is a valuable asset
Finally, the personal connection can also be a tremendous asset. Being able to meet your supplier face to face provides a greater opportunity for personal connection and relationship building. When you truly know someone, in person, when they are not just a voice on the other end of the phone half way around the world, that personal touch comes into play. When your business has a crisis perhaps, or needs a sudden order because of a surprise deadline, the personal relationship with your supplier allows you to call them and ask a favor – one they will probably grant. Try doing that to a faceless person on the other side of the world and you may at best get a simple “I'm sorry, that's not possible.”
So, there are many benefits to local sourcing and content. Even if you've already looked and ruled out local suppliers, take another look. Think creatively and see if there is room for building local content into you sourcing strategy and if it can work better for your business.