21 May 2014 | Jillian Lilico
If a significant part of your supply chain operates in countries with local content mandates, should local content management be an integral part of your supply chain management function?
Companies working in your supply chain in these countries as manufacturers, contractors and suppliers could have their contracts terminated, face government takeover threats and other stoppage risks if unable to comply with local content requirements. This could introduce additional supply chain risks.
Inserting local content clauses into your contracts is a useful approach, however here are five tips for managing local content within your supply chain to ensure good local content performance beyond your legal contract:
• Define how much of your supply chain falls under your local content obligations and the key business functions that need to be involved as a standard. This will provide clarity of scope. You could, for example, limit local content obligations to contracts over a stated contract value.
• Consult with selected members of your supply chain on how best to achieve in-country local content requirements. The benefits of this approach include the creation of a realistic local content plan which could include supply frameworks for local and indigenous businesses, supply chain-wide skills programmes and optimised plans for foreign direct investment which in turn increases host country stakeholder and political buy-in to your programme.
• Create a supply chain stakeholder group which owns the coordination of the in-country local content programme and takes joint responsibility for achieving local content targets. Such a group can improve the local content delivery capacity of your supply chain by sharing practical tools, local intelligence and good news; the latter providing a consistent message to stakeholders who matter.
• Share responsibility for funding and hosting buyer supplier exchanges, job and technology fairs so that local suppliers and potential employees are able to network with your supply chain to build relationships and conduct commercial arrangements. Remember that one ultimate aim of host country governments is to create a globally competitive domestic industry so these events should include an export element as well.
• Use technology to reduce the administrative costs of managing and reporting on your local content performance. These can range from e-portals which simply advertise business and employment opportunities to fully integrated systems which track and report on local content outcomes in a manner compliant with your organisation’s KPI reporting systems.
☛ Jillian Lilico is managing director at Demeter Development