Looking beyond global supply chains

Localisation has been gaining momentum through the ‘Make in India’ movement, and the pandemic has certainly accelerated it even further. A localisation strategy is a long-term plan that guides a business to adapt its product to the culture and language of different target markets. The ultimate goal of this strategy is framing how the company will position itself in a new market in order to make the transition as smooth as possible. Businesses are now witnessing sustainability, environmental and social benefits with localisation because it focuses on long-term strategies that are adaptive to the dynamic environment. Small- to multi-billion dollar businesses have adopted localisation strategy to achieve their sustainability goals. Let’s look at a few points that make localisation of manufacturing an imperative for companies.

Business sustainability

Today, we are living in a global village where businesses work in a connected ecosystem. With localisation of manufacturing, businesses look beyond the restricted global supply chains and focus on local procurement of materials. In line with this, businesses can expect faster turnaround time and greater cost efficiencies. Hence, business localisation comes across as a model to lead a sustainable business for the future.

When businesses are able to source locally, they save on import duty and other taxes. Furthermore, the efforts that are taken by the government like the Skill India programme, the Ease of Doing Business policies, and Foreign Direct Investments have contributed to the success of business localisation. The incentives by the government act as a gateway for businesses to fulfil local needs and those of international markets, aiding in export growth and the associated inflow of revenue.

Apart from import duties, when importing raw materials, products, semi-finished goods, and machinery from other parts of the world, businesses also have to bear the cost of logistics and transport to bring the materials from where they were produced to their final destination. Since localisation leverages local sourcing, the transportation distance — and associated cost — are reduced by a great extent. This allows companies to price their products competitively to sustain themselves in the market. Additionally, businesses can redirect these expenditures to initiatives such as customising products and investing in research and development and technology, depending on the local needs and conditions.

India is the fastest growing population in the world. As the population grows, the need for better jobs and a higher standard of living become a necessity.

Community welfare

Through localisation, businesses create job opportunities for locals and strengthen the local economy. The jobs present an opportunity for the locals to build a specialised skill set for their overall career development. Furthermore, businesses give back to the community through corporate social responsibility initiatives, such as engaging in community development around the facility areas.

Employing locals puts the spending power in the hands of the Indian youth, which ultimately gives a boost to the economy and increases the GDP of the country. While India has a diverse youth population, localisation of manufacturing brings in a pool of talent that pushes the companies towards innovation. While localisation improves the standard of living, it brings in the best of technologies, machines and global data to the people of the country.

And since procurement of raw materials takes place at a local level, these benefits also apply to the local suppliers. With the localisation of manufacturing comes the financial stability of the communities that helps them become more self-reliant and enables the country in improving its poverty index and standard of living index.

Fewer emissions

With customers being more environmentally conscious, many are reviewing their business policies to reduce their carbon footprint. Customers are preferring environmentally friendly products with fewer waste emissions. Businesses can reduce their carbon emissions by locating manufacturing hubs closer to customers and increasing local procurement of raw materials. This way, local manufacturing and shorter supply chains reduce the global movement of materials and goods, which is a major cause of CO2 emissions.

In conclusion, the rise in population will lead to a corresponding rise in demands, and businesses must adapt to sustainably meet those demands. As a country of 1.3 billion people, it is absolutely necessary to meet our domestic needs and build on our export capabilities by making India a manufacturing hub. This can be done with the right government policies and the understanding by business that localisation can be a route to sustainable growth.

In the elevator and escalator industry, leading players are adopting business localisation strategies in India for the benefit of the business, people, and planet. They support small-scale enterprises, embrace diversity, and prioritise the well-being of people along with profits.

The writer is president, Otis India.