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UNIDO Training Programme for the Establishment of a Subcontracting and Partnership Exchange (SPX) Centre in Kenya

The Training was held in Nairobi from December 2008 at the Kenya Industrial Research and Development Institute (KIRDI), Popo Rd. Off Mombasa Rd, South C.

Background

In the context of globalisation, transnational enterprises (TNCs) and large companies are looking for outsourcing and supply opportunities worldwide, in almost all sectors of industry and related services, in a continuous search for increased competitiveness. In this environment, only the most efficient and productive businesses survive. Competitiveness enhancement though restructuring, upgrading, and continuous improvements are thus the foundations for success.

Over the last two decades the industrial system has shifted from model of production, based on highly vertically integrated firms implementing mass production and maintaining a limited role for suppliers, to a pattern of production based on flexible and interacting networks of firms and organizations. This new model of production emphasizes cost competitiveness and high quality levels to be achieved through growing cooperation with suppliers within the global value chain through deepened partnerships.

Productivity growth for sustainable economic progress is now based on flexibility and specialization, with higher inter-firm interaction. At the same time, firms are becoming increasingly global and are establishing international networks of production. Within this scenario the development of international supply networks represents a critical issue for developing countries and, in particular, Africa.

In short, several key trends of supply chain strategies of transnational corporations (TNCs) can be identified:

  • Large TNCs increasingly seek to rationalize on suppliers in order to simplify their manufacturing and supply networks.
  • TNCs increasingly require suppliers of an international scale that are able to manage demand requirements across national borders.
  • TNCs are gradually shifting away from short-term transactional buying (req5ests for quotations (RFQs)) towards long-term contractual arrangements.
  • TNCs and original equipment manufacturers (OEMs) lack knowledge of the upstream supply network structure in developing countries.
  • As tier 1 and tier 2 suppliers develop their value chains they become increasingly adept at penetrating the traditional territory of OEMs.
  • TNCs are continuing to globally outsource and off-shore their operations. 


The findings of the UNIDO Africa Foreign Investor Surveys show that there are many opportunities for increasing local procurement by TNCs, provided there is sufficient government support or support from private sector associations for strengthening domestic industry-TNC linkages. Private sector initiatives are already underway to deepen local supply chains of large international subsidiaries (Business Action for Africa/International Business Leaders Forum). 

The emergence of these initiatives demonstrates that it will be more efficient to allocate scarce resources for engaging with traditional TNCs that are already invested, instead of attracting new ones. Maximizing the positive impact of all existing investors through enhanced collaboration with local firms and suppliers is therefore central for mobilizing FDI for economic development.

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