VIKESH RAMSUNDER: Local versus imported — finding the right balance that clicks
Global supply chains have been under pressure in the past 18 months, highlighting the need for adaptable and flexible operating models. When the first reports of a potentially virulent virus emanated from China in early 2020, the Clicks Group anticipated and prepared for some supply chain challenges. Little did we expect that we would still be fighting a global pandemic more than 18 months later.
Around the world long supply chains have been negatively affected during the pandemic. However, a centralised supply chain has allowed the Clicks Group to quickly adapt to each store’s changing customer demands. We’ve learnt the value of speed and agility, and the benefit of a company culture where decisions are made quickly.
One of our biggest advantages has been that Clicks Group sources more than 90% of its products from local manufacturers, suppliers and agents. As a result, global supply chain challenges have had less of an effect on the group than would otherwise have been the case.
As a retail group, we have long had the philosophy that a prosperous local economy is an advantage for us. It’s a virtuous circle: if the economy prospers, Clicks Group prospers. When the economy suffers, we suffer.
One of the biggest challenges facing SA — and an issue that admittedly keeps me awake at night — is the high rate of unemployment. A successfully functioning economy is dependent on salaried workers paying taxes, which fuels the government’s ability to provide essential services to its citizens. An environment characterised by growing unemployment is not sustainable given that it not only deprives the fiscus of much needed funds but creates its own socioeconomic challenges.
Business has to play a role in tackling the unemployment crisis and find ways of creating employment. I believe sourcing locally is a sustainable strategy that will create both upstream and downstream employment opportunities, and can be achieved without burdening consumers with increased costs.
The Clicks Group sources more than 5,000 private-label products either from local manufacturers or suppliers at a procurement cost of R2.6bn a year. Plans are in place to launch an additional 176 private-label products, valued at about R150m a year, in the near future. This investment is providing opportunities for local manufacturers to grow, prosper and create more jobs.
So committed are we to sourcing locally that where we can’t find a local supplier, we help develop one who meets both our quality and cost requirements. This is because we understand that by sourcing locally we help create opportunities for employment. This policy is not purely altruistic: it makes good business sense.
The challenge around any localisation strategy is to ensure the consumer is not detrimentally affected and ultimately faced with higher costs. This is something I’m keenly aware of, particularly as value for quality products is a hallmark of the Clicks offering. In the wake of the pandemic, value has become increasingly important for many households.
Along with other CEOs, I am working with the department of trade, industry & competition on an ambitious initiative to reduce imports in a number of areas by 20% in the next five years. I have been tasked with investigating how we can reduce imports of medicines and instead manufacture them locally at an affordable price point.
SA pharmaceutical manufacturers have both the capability and the capacity to produce medicines locally. Given that the majority of these products are consumed in the public sector, the knock-on effect of producing medicines locally and affordably is potentially significant.
I do not believe the debate around localisation should be an either/or debate. There will always be a place for imported products. Similarly, there is a place for local sourcing. As a retailer, finding the right mix of imported versus locally manufactured products per category is critical.
The challenge with importing is balancing the risk of ordering larger quantities of inventory at a potentially better cost. It’s a successful business strategy when it works, but far less efficient when you get the order wrong.
On the other hand, in a country facing high unemployment, growing our local manufacturing capacity has the potential to make a meaningful difference and has the added benefit of ensuring the country is less vulnerable to global supply chain disruptions.
• Ramsunder is a board member of the Consumer Goods Council and CEO of Clicks Group Limited.
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