Breaking down how to join a multinational corporation’s supply chain:Multinational corporations require local assistance, whether it's for establishing a facility or procuring goods and services.The Enterprise Exports and FDI Forum included a discussion on the qualities these multinationals look for when seeking local suppliers and service providers, as well as the challenges they encounter in the process.

The panel brought together:

Omar Elsahy, General Manager, Amazon Egypt

Khaled Morsy, CEO, DB Schenker

Tarek Kamel, CEO, Nestle Egypt

What are the qualities multinationals look for in a local partner? Resilience, commitment, adaptability, contingency planning, and operational excellence as essential qualities in a local partner, Morsy said. Commitment, particularly in terms of customer satisfaction and timely deliveries, was highlighted as a key qualification. The ability to adapt to new trends, such as sustainability and environmental, social and governance (ESG) practices, were also recognized as an important characteristic of a local partner but he explained that commitment is key.

When selecting suppliers, Amazon considers specific tenets: First, Amazon is comfortable saying no when quality standards are not met, Elsahy explains. The second tenet emphasizes business continuity and customer experience. Another tenet is that a solid foundation is essential for growth. Although the company’s due diligence process before engaging with a company is extensive it facilitates faster progress in the future. Safety and compliance are crucial factors, encompassing adherence to local regulations and international standards. Amazon strives to maintain the same level of quality for both Egyptian and international communities. Amazon also places importance on sellers’ readiness to expand globally. The goal is to provide support and resources to enable small sellers to successfully reach international markets. As a result, success stories have emerged where businesses have expanded to countries such as the UAE, Saudi Arabia, the United States, and Germany.

Nestlé focuses on quality, compliance, and sustainability: In the consumer goods industry, players such as Nestlé zone in on ensuring the right quality, adherence to standards and specifications, and compliance, Kamel explained. “We work with suppliers as partners” who share the company’s mission and vision for the long term, he said. In order to foster sustainable partnerships, Kamel emphasized the necessity for suppliers to have the capability to invest in their operations and train their workforce. Environmental considerations and sustainable operations were also identified as significant criteria in Nestlé's approach to picking local suppliers. Kamel pointed out that failure to meet these criteria would present challenges and limit opportunities for collaboration.

Meeting quality requirements for exports: Kamel addressed some of the challenges faced by Egyptian companies in meeting international requirements for exporting goods. He emphasizes the importance of quality standards for both exports and the local market since quality specs are non-negotiable. Nestlé, he said, produces 90% of products sold in Egypt locality and 45-50% of the production input needed for local production is sourced locally. He explained that local suppliers struggle to meet quality standards. To tackle this, the company follows a rigorous process of identifying, auditing, developing and then re- auditing suppliers which takes a lot of time and requires a lot of effort and a hefty investment from the suppliers.

Companies need help with consolidating their needs and connecting them with qualified suppliers: DB Schenker’s “job is actually to integrate local partners with multinationals through the supply chain services that we offer,” Morsy explained. Currently, there is a lack of a unified entity that consolidates the requirements of various companies, both multinational and local, and manages a list of suppliers, Kamel said. Such an entity would enable suppliers to have a substantial volume of business, obtained through the consolidation of orders, which would in turn allow them to invest in production facilities, capabilities, safety measures, and other necessary elements, according to Kamel. This consolidation could alleviate the financial burden on suppliers, he added. Kamel further suggested that the establishment of this entity could be driven by the private sector, the government, or a collaborative effort.

Supply chain challenges prominent brands faced in Egypt: The Egyptian market is promising enough that global brands like L'Oréal and Samsung set up shop in Egypt in 2013 despite security concerns, but they encountered significant obstacles related to customs and logistics infrastructure, Kamel said. Manual customs processes posed a major challenge, and distribution centers and warehouses faced limitations. Although some progress has been made, there is still room for improvement, particularly at the operational level within customs and government agencies. These challenges must be addressed to sustain a reliable supply chain, he said.

Has the drive to localize supply chains decreased? Depending solely on local products is not in line with certain supply chain principles that dictate that factors such as resource availability and scale should dictate where goods are produced, Morsy explained. However, disruptions in the global supply chain have led to a reliance on local goods, he added. A shift in consumer preferences towards local products, driven not solely by necessity, can be a positive development, especially when the goods are competitively priced and of comparable quality, he noted.

Looking forward: Morsy highlighted Egypt's geographical advantage and the need to focus on developing logistics infrastructure to become a regional distribution hub. He also mentioned Egypt's improved ranking in the World Bank Logistics Performance Index and its potential to serve emerging and advanced markets in the GCC countries, Europe, Africa, and beyond. Elsahy highlighted the importance of building good products and services, earning the right to become a leader, and prioritizing customer satisfaction over competing with others, emphasizing the significance of building viable, scalable, high-quality products.

We could not have made the Enterprise Exports and FDI Forum without the support of…