Sourcing Goes Local in South Africa

April 1, 2009
Multi-national businesses in South Africa report more local sourcing in the wake of the global economic recession.

The research study “supplychainforesight 2009” has demonstrated most South African enterprises are radically revising their commitment to global sourcing, manufacturing and even distribution of product as markets contract worldwide and the complex global supply chains, built out in the years of plenty, become too expensive to sustain, says sponsor Barloworld Logistics.

Barloworld Logistics surveyed over 250 medium and large South African businesses and found that one key objective in the short-term for all businesses is procurement optimization. The prior-year study focused on so-called “complexity masters,” says Barloworld. Those are companies globalizing their supply chains most successfully. That survey indicated about two thirds of the sample companies had some components of their supply chains elsewhere in the world. This, says the study sponsor, was ample evidence of the “explosion of the globalized economy.”

By stark contrast, in interviews with C-level executives in different industries for the 2009 research, the tide has definitively turned in terms of short-term objectives. Executives reported they were now focused more on issues like local events, localizing the inbound supply chain, feasibility of rail transport, and physical security of goods in transit.

Barloworld noted, “As we can see from these top-of-mind factors, peculiarly South African conditions once more come into play, such as cargo security and the physical logistics infrastructure. These have not ever gone away, but in a recessionary environment where localizing supply represents a viable cost-reduction approach, they become burning issues.”

The report summary continued, “The extent of the move away from global to local is indicated in the general research by the finding that other factors such as supplier selection and inbound transportation optimization are all fairly prominently indicated among short-term objectives. There can be no doubt that the recession has refocused attention on sourcing supply locally. This is a double edged sword of course–since it exposes businesses to the risk of unreliable supply lines, a lack of skills in manufacture, and increased costs as a result.”

“The move away from overly risky global supply chains is understandable, but complete localization is probably not feasible in the longer-term, certainly not without the necessary local skills and infrastructure. It’s a crucial issue for South Africa’s national economy,” concludes Johan Dekker, Barloworld Logistics spokesperson on the research study.