Global sourcing allows for bridges to be built between indigenous and overseas firms, writes Alan Hobbs.
Looking to build on the economic value of multinationals operating in Ireland was one of the most exciting and challenging initiatives identified by Government in its Action Plan for Jobs 2012.
Over the past year, a new dedicated Global Sourcing team at Enterprise Ireland has worked closely with colleagues in IDA Ireland to identify multinationals representing potentially millions of euros worth of additional business right here on our own doorstep. Meeting the needs of such companies can also open doors to wider opportunities with their parents and sister companies overseas.
Enterprise Ireland has carefully reviewed its own client base to identify companies with products and services particularly suited to the variety of multinational companies with operations here. The Irish business processes outsourcing industry, with such companies as Abtran, VoxPro, Rigney Dolphin and Eishtec, can do especially well in this space.
Since it was established, the team has made significant progress in identifying the potential of this marketplace and understanding and finding ways to address obstacles. Joint targets and metrics have been designed to deliver on this strategy and further initiatives will be included in the forthcoming Action Plan for Jobs 2014.
Working closely with IDA Ireland, the team has met with more than 100 multinationals to discuss their procurement strategies with the primary aim of identifying import substitution opportunities. Life sciences, including medical devices and pharmaceuticals, engineering, ICT and internationally traded services have been identified as offering good medium term opportunities. The search for new opportunities is not only confined to companies originating abroad. The team is also engaged with significant Irish companies such as Ryanair, Aer Lingus and eircom.
Effective networking and identification of international champions are important elements in the Global Sourcing strategy. A number of roundtables and workshops have been undertaken over the past 12 months with the support of such organisations as Accenture, SAP, the ACCA’s CFO Forum, trade associations and chambers of commerce. The team has also spread its message in association with such initiatives as IBM’s Smart Cities and the Med In Ireland medical technologies showcase.
In the future, ministerial participation on trade missions abroad is set to sharpen the focus on global sourcing opportunities. There are even plans for a somewhat unusual trade mission to Ireland next year as a practical way of highlighting the ‘world beating’ quality of Irish products and services on offer.
Enterprise Ireland is also in the process of strengthening its mentor panel by adding executives with relevant multinational expertise to advise and guide would-be Irish suppliers. The agency is recruiting international champions in multinational operations in Ireland who can provide valuable introductions to their head offices and tapping into the global Irish network.
Our research, however, has shown that there are no obvious trends or simple approaches that will provide a magic key to unlocking these opportunities. Every multinational, even ones operating in the same sector, approach purchasing differently and give their subsidiaries significantly different degrees of autonomy.
Fortunately, Irish export companies generally have a good understanding of just what it takes to compete with large, high quality competitors in overseas markets and are well able to step up to the plate. Last year’s record exports of €16.2bn, at a time of exceptionally low growth in terms of overall international trade, demonstrates that they are already competing with some of the best companies in the world and winning market share from them.
However, becoming a supplier to a large, well-established multinational is never easy. In terms of meeting specifications, safety standards and the myriad technical certification and regulatory requirements, the bar is indeed set high.
Scale is another big challenge, with large international companies keen to drive efficiency by reducing the number of suppliers with whom they do business. It can be extremely difficult, even for a good supplier who has ticked all the relevant boxes, to displace existing suppliers with which a multinational already has a good working relationship.
One of the methods being pursued to address the issues of familiarity and scale involves using well placed intermediaries. Firms such as Accenture, PM Group and Mercury Engineering are already major purchasers of Irish products and services that they sell onto their multinational clients.
IDA-Ireland’s increased focus on attracting much younger, high growth companies to Ireland also offers Irish firms the chance to establish supplier relationships at a much earlier stage and to grow their business as their client grows.
This is in part what the Minister for Jobs, Enterprise and Innovation, Richard Bruton TD, had in mind when he said at the announcement of the Global Sourcing initiative in November 2012 that the capabilities of innovative Irish exporting companies could be a key selling point in the country’s efforts to attract foreign direct investment.
Ireland has been extremely fortunate in the calibre of overseas companies who have chosen to locate here over many years. Relatively recent arrivals, such as Google and Facebook, are leading the new wave in ICT. When they make such a choice it sends a strong message to other companies throughout the world. Likewise, when they choose to purchase the goods and services they need from Irish suppliers, the world takes note. The Global Sourcing initiative is a far more complex and influential strategy than it might appear on the surface.