A global mar­ket por­tal on our doorstep

Ir­ish com­pa­nies en­joy key ad­van­tages when it comes to break­ing into global sup­ply chains

The Irish Times - Business - - SUPPLY CHAIN MANAGEMENT - BARRY McCALL

The eco­nomic ben­e­fits of for­eign di­rect in­vest­ment are well-doc­u­mented: hun­dreds of thou­sands of di­rect and in­di­rect jobs, bil­lions of euro in cor­po­rate taxes, and hun­dreds of bil­lions in ex­ports are usu­ally the ones to make the head­lines. How­ever, there is an­other, of­ten hid­den, ben­e­fit and that is the op­por­tu­ni­ties it of­fers Ir­ish firms to break into global sup­ply chains.

Most of these com­pa­nies are world lead­ers in their sec­tors. Prod­ucts man­u­fac­tured in Ire­land are des­tined for Euro­pean and global mar­kets and rich re­wards await any Ir­ish firm which can man­age to win a place on the sup­ply chains.

Highly in­no­va­tive Ir­ish com­pa­nies such as Bel­lur­gan Pre­ci­sion and Mo­du­lar Au­to­ma­tion have es­tab­lished them­selves as sup­pli­ers to some of the world’s lead­ing med­i­cal de­vice com­pa­nies as a re­sult of build­ing re­la­tion­ships with their Ir­ish sites. In the ser­vices sec­tor, many Ir­ish build­ing and me­chan­i­cal and elec­tri­cal con­trac­tors have built highly suc­cess­ful in­ter­na­tional busi­nesses on the back of their track records with multi­na­tional clients here in Ire­land.

And the op­por­tu­ni­ties are in­creas­ing as a re­sult of changes on global mar­kets, ac­cord­ing to En­ter­prise Ire­land se­nior in­no­va­tion ex­ec­u­tive David Kee­ley. “Ma­jor dis­rup­tion is hap­pen­ing glob­ally in nearly ev­ery in­dus­try due to fac­tors like dig­i­tal trans­for­ma­tion and en­vi­ron­men­tal sus­tain­abil­ity,” he points out. “This is cre­at­ing op­por­tu­ni­ties to sup­ply new types of prod­ucts and ser­vices into global sup­ply chains.”

The chang­ing na­ture of the sup­ply chain it­self is also hav­ing an in­flu­ence. Large com­pa­nies gen­er­ally want to deal with as few sup­pli­ers as pos­si­ble. They deal di­rectly with a small num­ber of tier-one sup­pli­ers who will meet their global needs for cer­tain prod­ucts or ser­vices. At most, there will be two ap­proved tier-one sup­pli­ers for any prod­uct or ser­vice and these sup­pli­ers are in­creas­ingly ex­pected to man­age lower-tier sup­pli­ers on be­half of the client com­pa­nies.

This sim­pli­fies mat­ters greatly and drives out cost for the client com­pany. It also makes it harder for smaller com­pa­nies to gain di­rect en­try to the chain.

Com­plete sys­tem so­lu­tions

“Ma­jor multi­na­tional com­pa­nies are in­creas­ingly look­ing for their top-tier sup­pli­ers to of­fer them com­plete sys­tem so­lu­tions,” says Kee­ley. “They’re re­duc­ing the num­ber of their tier-one sup­pli­ers de­spite a trend to­wards an in­crease in prod­uct com­plex­ity. Sup­pli­ers with the ca­pa­bil­ity to be in­no­va­tive, re­spon­sive and prac­ti­cal are be­com­ing in­creas­ingly im­por­tant and at­trac­tive. In ad­di­tion, sup­pli­ers that are bet­ter at fos­ter­ing and main­tain re­la­tion­ships with end customers and sub-sup­pli­ers are be­com­ing in­creas­ingly at­trac­tive.”

In many cases, this means Ir­ish firms will ac­tu­ally be deal­ing with the tier-one sup­plier rather than di­rectly with the end cus­tomer.

Prof Donna Marshall of the UCD Smur­fit Grad­u­ate School of Busi­ness says Ir­ish sup­pli­ers need to un­der­stand the multi­na­tion­als and their re­quire­ments. “Ma­jor multi­na­tion­als are all look­ing for the same things: great prod­ucts, low prices, ex­cel­lent qual­ity and de­liv­ery as stan­dard,” she says. “These are not ‘nice-to-haves’ but ‘must-haves’ for multi­na­tion­als. So, we have to go above and be­yond that as Ir­ish sup­pli­ers and re­ally un­der­stand what the multi­na­tion­als need on top of great prices, de­liv­ery and qual­ity.”

The com­pet­i­tive land­scape is also im­por­tant. “What we also have to re­alise in Ire­land is that we’re not com­pet­ing against each other to break into multi­na­tional sup­ply chains, we’re com­pet­ing with the rest of the world – Sin­ga­pore, the Nether­lands, Bangladesh, Tur­key, and so on. We re­ally need to stand out. We need to find ways to make Ir­ish sup­pli­ers re­ally in­ter­est­ing and es­sen­tial for multi­na­tional sup­ply chains.”

Those stand-out qual­i­ties vary from sec­tor to sec­tor. “In cer­tain sec­tors, like pharma and med­i­cal de­vices, qual­ity, safety and se­cu­rity are ab­so­lutely key, this is sim­i­lar to the food in­dus­try. In other in­dus­tries, in­no­va­tion or re­silience – where you have to have the abil­ity to change quickly, ei­ther be­cause of nat­u­ral dis­as­ters, like floods, earth­quakes, vol­ca­noes or so­cial dis­as­ters like sick­ness, strikes – or show­ing that you can be ag­ile, can make a huge im­pact. Show­ing a com­pany that you have the abil­ity to change quickly, that you are ex­pert in sce­nario-plan­ning and ex­e­cu­tion and that you an­tic­i­pate both short- and long-term changes can make you very at­trac­tive.”

Demon­strat­ing how in­no­va­tive you are in terms of prod­ucts or pro­cesses al­ways make you stand out from the crowd, she adds. “So re­ally think about what you are pro­vid­ing that no one else in the world can pro­vide. This might even be great re­la­tion­ship man­age­ment con­nec­tions, which we do re­ally well in Ire­land com­pared with the rest of the world. Think dif­fer­ently about what you are re­ally good at.”

Other things Ir­ish com­pa­nies can do is in­crease their power and reach by con­nect­ing and col­lab­o­rat­ing with other sup­pli­ers to show they are part of a large net­work that would be of value to the multi­na­tional sup­ply chain. “A multi­na­tional might re­ally like your prod­uct or process but if you can’t show how you will scale up to meet their needs, they will go else­where, so re­ally think about how to do this. “

Kee­ley agrees and ad­vises Ir­ish firms to get in­volved in iden­ti­fy­ing new end-mar­kets and form­ing re­la­tion­ships with end customers and tier-one sup­pli­ers by cre­at­ing in­dus­tryled end-mar­ket clus­ters of large and small com­pa­nies, multi­na­tion­als and re­search in­sti­tutes to help take ad­van­tage of op­por­tu­ni­ties.

En­ter­prise Ire­land is as­sist­ing in the de­vel­op­ment of such clus­ters. “The key is for mem­bers with dif­fer­ent skills, ca­pa­bil­i­ties, ex­pe­ri­ences and net­works to col­lab­o­rate and in­no­vate to­gether, al­low­ing for ex­ist­ing es­tab­lished sup­plier re­la­tion­ships to be lever­aged, copied and even aug­mented with ad­di­tional value of­fer­ings in part­ner­ship with other clus­ter mem­bers.”

There are other con­sid­er­a­tions to be taken into ac­count, ac­cord­ing to KPMG in­di­rect tax di­rec­tor Fionn Uibh Eachach. He points out that com­pa­nies ex­port­ing out­side of the EU will have to deal with a va­ri­ety of cus­toms and VAT is­sues which may not af­fect them at the mo­ment.

“If you want to look fur­ther afield than Europe, there will be cus­toms and VAT im­pli­ca­tions,” he says. “Even if there are no tar­iffs on the prod­uct, there will still be ad­min­is­tra­tive mat­ters such as cus­toms dec­la­ra­tions to take care of. You have to re­tain agents to look after this and it is a non-tar­iff cost which has to be taken into con­sid­er­a­tion.”

He also ex­plains how VAT rules can af­fect cash flow. At present, busi­ness-to-busi­ness trans­ac­tions within the EU are ef­fec­tively zero rated for VAT. That is not the case in other coun­tries. Even if the VAT at point of im­port can later be re­cov­ered, the fact that it has to be paid up­front is a cost to the busi­ness which needs to be con­sid­ered.

Ab­sorb the costs

“Busi­nesses sell­ing into non-EU mar­kets have to look at the com­mer­cial terms of the sale and ask if they can ab­sorb the costs in­volved. You also have to look at the ju­ris­dic­tion you are sell­ing into and their tax rules.”

The big­gest les­son is do a lot of re­search, says Prof Marshall. “Com­pa­nies re­ally need to un­der­stand the com­pany’s sup­ply chain they are try­ing to break into, what makes it tick and what they can bring to the sup­ply chain that no one else can.

“For in­stance, if you want to get into the sup­ply chain of Marks & Spencer, you have to ex­am­ine their cul­ture, their com­mu­ni­ca­tions, their val­ues. You’ll see they are ded­i­cated to not only very high qual­ity but also sus­tain­abil­ity.

“You need to demon­strate that you are fan­tas­tic at de­liv­er­ing high-qual­ity prod­ucts con­sis­tently and that you have vis­i­bil­ity in your sup­ply chain in terms of em­ploy­ment and labour is­sues, gen­der is­sues, health and well­be­ing, and in terms of the en­vi­ron­men­tal im­pact of your own op­er­a­tions and those of your sup­ply chain.”

This gives Ir­ish firms a par­tic­u­lar ad­van­tage, she adds. “We are the ‘green isle’ so show­ing the world how sus­tain­able we are could re­ally be a unique sell­ing point to dif­fer­en­ti­ate us from other na­tions. We re­ally need to en­hance our sup­ply chain sus­tain­abil­ity prac­tices and en­sure that when multi­na­tion­als are choos­ing their sup­pli­ers to meet their sus­tain­able de­vel­op­ment goals, they know that Ire­land is a key coun­try to do that.”

Ma­jor dis­rup­tion is hap­pen­ing glob­ally in nearly ev­ery in­dus­try due to fac­tors like dig­i­tal trans­for­ma­tion and en­vi­ron­men­tal sus­tain­abil­ity

Newspapers in English

Newspapers from Ireland

© PressReader. All rights reserved.