HomeBusinessSupplier development key to curbing Zim’s import bill

Supplier development key to curbing Zim’s import bill

The ballooning imports against a drop in exports has left Zimbabwe faced with liquidity challenges. Inasmuch as importation of finished products is adding towards the bill, a closer look also shows that other production-related imports are very high and many of these do have local alternatives. From a supply chain professional’s view, a lot can be done to help ease the amount of money getting out of the country through importation of raw materials, packaging and other auxiliary materials.

Gibson Sibanda

Supplier development is a key function of supply chain management strategy. In its simplest form, it is defined as any long-term act or all of the efforts undertaken by a procuring firm (supply chain partner) with its supplier(s) to improve the supplier (supply chain partner) performance and /or capabilities of the same to satisfy the current and future requirements of the sourcing firm. Supply chain management theory underpins that success of the firm is not entirely dependent on its own activities, hence members of the supply chain network plays an important role in influencing the performance of the local firm, therefore, supply chain members should coordinate and collaborate well to create supply chain surplus which the entire network feeds on.

Supplier development can take several forms ranging from direct, indirect, reactive, proactive, structured or unstructured dimensions, etc. Direct forms involve assisting the supplier either financially or through human capital needs. A procuring firm engages supplier based on the supplier’s evaluation results, when there is underperformance from set criteria and based on these the procuring firm chips in to ensure supplier meets current or even future needs of the focal firm. This type of supplier development practice is taxing, time consuming and costly but the benefits are awesome. Indirect supplier development is most applied by many firms where there is constant communication regarding supplier performance against set deliverables, and is done on agreed timelines in a year, especially to those firms that are ISO certified. There isn’t much benefits to the procuring firms, especially if the supplier is falling short of capacity and financial capabilities.

The East, particularly the motor industry, led by Toyota adopted supplier development practices as early as 1940s. Toyota joined supplier associations to assist a number of subcontractors to improve their productivity. Toyota’s objective was aimed at improving quality, supply chain and relationship management issues. After realising the gains made by Toyota and other automotive firms, the West as late as the 1990s adopted supplier development practices. Come 2000s, the motor industry as a whole pressed ahead with supplier development policies and practices and it became part of their popular, powerful and strategic tool to enhance supply chain performance. As benefits of supplier development continued to unfold, many global organisations came on board and these are HP Marks and Spencer, 3M, Motorola, Boeing, and McDonald, to mention but a few.

Research conducted about supplier development practices in the motor industry in South Africa revealed that Toyota was the leader and heavily involved in implementing the practice (Bayne, 2010). The underlying structural supplier developmental practices in the South African industry is part of fulfilment of the Black Economic Empowerment policy. Results also showed that supplier development improves organisation’s bottom line, supplier relationship, enhances collaboration and overall supply chain performance.

The underlying reason behind importation of raw materials where these are locally available is due to suppliers failing to meet the procuring entities requirements, be it technical, production capacity, quality and financial. Once this happens, procurement practitioners turn to the global market for sourcing. From an African perspective, most organisations that embrace supplier development as part of their supply chain management strategy only do so provided they have import challenges.

In order to curb the ballooning import bill, government through relevant departments in consultation and collaboration with relevant authorities, supply chain practitioners and industrial leaders can adopt one or more of the following supply chain management interventions. These should encourage, enhance and promote local supplier development as a means of reducing the amounts of raw material, packaging and auxiliary material imports.

l Local content procurement policy — in every business set up, certain percentage of their raw materials to be sourced locally. This should apply to all industry sectors, be it agriculture, extraction, manufacturing, processing, retail and service industry.

l Tax rebates on supplier development — undertaking supplier development is a costly and time-consuming exercise, hence relevant authorities should come up with policies that are mutually beneficial. This could be done by structuring tax rebates that promote supplier development and be aligned with the amount of resources a firm puts into developing local firms.

l Partnership policies — come up with policies that encourage partnership. Formation of supplier association within a specific industrial cluster for sharing of information on innovation, continuous improvement, new product development and best practices.

Empirical evidence shows that though supplier development is not very intensively adopted — especially in developing countries — those that make it part of their strategic tool are performing very well. While the practice is not very much evident in Zimbabwe, some of the reasons constitute future topics on this column. if the relevant authorities push for policies and incentives to adopt, implement and promote this tried and tested strategy, this can help reduce the ever increasing import bill.

l Gibson Sibanda is a member of the Chartered Institute of Procurement and Supply, secretary of CIPS Zimbabwe branch. The views expressed in the article are personal. Feedback: gibbiesibanda@gmail.com

Recent Posts

Stories you will enjoy

Recommended reading