Sourcing for new suppliers of aluminium amid Trump’s tariff hikes

Introduction

Sodas4Africa was founded in 2007 with the manufacturing facility originally based in South Africa. Since then, we have expanded our operations to various African countries with more manufacturing facilities in Kenya and Namibia. We are very well known for the carbonated drink called Bubbles and available in a variety of flavors. 

As of till now we have been procuring aluminium cans of the soft drink from suppliers in Mexico and Canada. With the threat of a 25 percent tariff increase looming in August on aluminium cans, we will be forced to find alternative suppliers in different countries. 

STEEPLED analysis for a sourcing strategy

Social analysis

Sodas4Africa should source for suppliers of aluminium cans locally for sustainability and social responsibility. If the aluminium cans are sourced from suppliers in Africa the company will be more profitable as they will avoid the 25 percent tariff hike and as a result enable them to be socially responsible and employ more people in manufacturing and production. 

GZ Industries is a supplier of aluminium cans based in Nigeria. They manufacture 3 billion cans per year and a large supplier of cans for Coca-Cola Co. In 2015, GZ Industries and the Golden Era Group have announced a R1-billion joint venture called Gayatri GZI Beverage Cans. Their first project was the construction of a large scale beverage can plant in Johannesburg of which operations started in the 2nd quarter of 2016. 

With this project, local South Africans were employed and trained to operate this facility and therefore Gayatri GZI were able to boost production. Sodas4Africa should use Gayatri GZI as a supplier as they will have the capacity to produce 3.5 billion aluminium cans per year with the completion of the plant in Johannesburg. Thus, the company will deal with a trustworthy supplier to keep up with the demand from the market and be profitably sustainable. 

This will also result in the need to employ more people from the South African public to help with the production at the facility. 

With the sourcing of aluminium cans from a new supplier and especially local contributes to the unemployment rate in a positive way. A company as big as Sodas4Arica has a corporate social responsibility and therefore play a significant role in the community to employ, train and upskill. Us as a company also have the responsibility to operate a sustainable business for future generations to come. 

Technological analysis

Sodas4Africa needs to keep up with demand and therefore needs suppliers that are technologically advanced with machinery that can manufacture and supply aluminium cans at the right quantities and efficiency. 

The Gayatri GZI plant that was built in 2016 with world class production technology and innovation capabilities will ensure supply meets demand regarding the cans.

Technology and innovation enables businesses to be competitive in an ever growing market and to be profitably sustainable for years to come. 

Economic analysis

Sourcing cans locally from a supplier like Gayatri GZI will save Sodas4Africa a lot on costs like the exchange rate, planned tariff hikes and expensive labour from Mexico and Canada. Sourcing locally will be a lot more cost effective and it won’t be necessary to inflate the selling price of Bubbles drinks due to Trump’s tariff hikes. 

The spending power of the customers like the wholesalers and retailers to whom we supply won’t be affected as no tariff hike are implemented thanks to the sourcing strategy. 

Delays in production will also be less as the aluminium can supplier is local and very close to the production facility. A delay in production will mean

Environmental analysis

The environment or shall I say the weather won’t play a significant  role or part as it did when the aluminium cans were imported from Mexico and Canada. Aluminium cans will only be transported by truck and not shipped via sea freight which will save us on insurance costs. 

The risk of transporting cans via sea freight and damaged caused by storms over the sea will be eliminated. 

The environment forms an important part of the analysis in sourcing a different supplier. If goods or materials have to travel far or overseas it increases the risk of damages or delays caused via storms over the ocean. If the supplier is close to the production facility, the chances of weather affecting the shipment decreases the risk significantly. The chances of damages and delays in production are much less.

Political analysis

Trump’s tariff hikes on aluminium cans  from Mexico and Canada forced Sodas4Africa to source for suppliers elsewhere. The strategy to source for suppliers locally will not only benefit Sodas4Africa in the present but also in the future as global political factors or decision won’t affect the supply chain in the future as much. With the decision to use Gayatri GZI as a local and trusted supplier the risk of global or international policies affecting the supply chain is minimised.

It is important to consider political factors like foreign trade policies and trade restrictions. As we saw with Trump’s tariff hikes these policies and restrictions can severely impact procurement or supply chains as a whole. If these factors are not taken into consideration, companies will have to downsize or close all operations.

Legal analysis

Due to the tariff hikes, the aluminium cans will no longer be imported from suppliers in Mexico and Canada. With the choice of supplier being local, there will be less legalities as the cans supplied will not go through customs as no borders are involved. 

Ethical analysis

The change of suppliers from global to local places a big emphasis on business ethics and the reputation of Sodas4Africa. It is important for our business to be involved with a supplier with a clean track  record regarding corruption and bribery. Proper checks need to be done on the new supplier and this will include audits, going through their financial statements and references from their current customers.

How proposed tariffs are affecting my sourcing strategy

Firstly, I will look to avoid the tariff hike and extra costs on imports and look for a supplier locally or in Africa. I found a supplier of aluminium cans that are based in Johannesburg, South Africa. The company is called Gayatri GZI and they manufacture 3.5 billion cans annually. 

 

The choice of a local supplier will mitigate risk of any future unforeseen changes that could affect supply chains globally. The challenge is to find a supplier that is trustworthy with a good track record and footprint in the industry. GZ industries that was first established in Nigeria and supplied over 1.8 billion aluminium cans globally of which one of their customers were Coca Cola Co. is a good reference to work with. They later merged with The Golden Era Group and now supply 3.5 billions cans in Western and eastern Africa. Thus, there is no question mark regarding their production capabilities and if they will be able to keep up with the production demand at Sodas4Africa. 

The manufacturing facility of Sodas4Africa is also based in Johannesburg, South Africa. This is a major opportunity as both the manufacturing facilities for Gayatri GZI and Sodas4Africa are close to each other. The close proximity will mean the transport costs will be minimised, less or no delays in production and the lead time will be reduced. 

Conclusion

Gayatri GZI will be the primary supplier of aluminium cans as the location from a sourcing perspective makes sense, they have good references of customers like Coca Cola Co. and with elevation in production it will contribute towards unemployment and more jobs will be created. 

Sodas4Africa will be more sustainable on different levels. The company will show a more sustainable profit for the future and provide work opportunities for the future generations to come.

For companies like Sodas4Africa it is important to be adaptable and proactive because the future holds no certainties. Companies need to reduce risk for unforeseen or unplanned disruptions in supply chains. This is why we believe that local suppliers is the best way forward.