Five tips: Developing a local content supply chain policy

28 January 2014 | Jillian Lilico

Local content is a policy tool used by some countries to create jobs and develop local supply chains to become internationally competitive.

Local content requirements usually include a combination of mandates to investing companies to develop and employ local people, to procure local goods and services, develop local suppliers and to transfer technology through licensing arrangements, joint ventures, training or other means.

Local content requirements (LCRs) are mainly applied to the extractive industry but are also used in the renewable energy, automotive and tourism sectors, among others.

A local content policy (LCP) is a statement which communicates your company’s commitment to continually increase local content in its global operations. The importance of supply chain compliance and procurement expenditure provides an argument for the procurement function to own your company’s local content policy.

Here are my five top tips to developing a LCP:

1.     Consult internally and externally. The development of the mission and commitments in your LCP requires coordination from your senior management team, human resources, community and government relations, special projects (where new products, project concepts or new investments might originate), among others. Consult with local suppliers and industry groups on the types of support actions they value most.

2.     Understand why local content is linked to economic development and understand internationally-recognised global development objectives. A better understanding of the economic rationale for local content will help you understand how your company’s activities contribute to sustainable development.

3.     Understand the structure of your supply chain. This will enable you to advertise the industries which support your business, to prioritise industry clusters for development and to develop a phased supplier development plan depending on the effort and time required for development of clusters. Criteria for prioritising clusters include the importance to national strategic objectives, potential to create local employment and potential to add value locally.

4.     Analyse and categorise your procurement expenditure to understand high, medium and low risk contract categories. Assign mandatory capability standards you require as a pre-requisite to manage supply chain risks, manage local supplier expectations and to help them create a business improvement plan.

5.     Understand your stakeholders. Identify the range of individuals and organisations that have a direct interest in your local content policy. Provide your policy in different formats such as videos, brochures and in local languages. Create a local content communications plan to publicise good news stories arising from the implementation of your local content policy.

☛ Jillian Lilico is managing director at Demeter Development

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