(Source: Tempo English)

The global industrial landscape has become increasingly uncertain in recent years. Trade conflicts, geopolitical tensions, currency fluctuations, natural disasters, and transportation disruptions can affect the availability and price of materials. For industries that depend heavily on imported components, these disruptions can quickly increase production costs and create delays. This situation shows why strengthening local manufacturing is becoming increasingly important, especially for countries such as Indonesia that are still dependent on imports for many industrial materials and components. Local manufacturing can help industries reduce their dependence on international suppliers. When companies obtain more materials and components from domestic producers, they can reduce exposure to international shipping problems and fluctuations in foreign exchange rates. Shorter distances between suppliers and manufacturers can also make transportation and communication easier. According to the United Nations Industrial Development Organization (UNIDO), developing domestic industrial capabilities is important for building more resilient and competitive production systems.

However, strengthening local manufacturing does not mean completely eliminating imports. Some advanced components and raw materials may still be more efficiently produced overseas because of differences in technology, production capacity, or cost. Instead, industries need to identify which materials can realistically be produced domestically and gradually develop local suppliers for those products. This approach can create a balance between international sourcing and domestic production while reducing excessive dependence on a single source. Another benefit of stronger local manufacturing is its potential impact on the domestic economy. When companies purchase materials and components from local suppliers, more economic activity remains within the country. This can support local businesses, create employment opportunities, and encourage the development of supporting industries. Over time, stronger domestic manufacturing capabilities can also encourage knowledge transfer and technological development.

For Indonesian industries, improving the competitiveness of local suppliers is therefore an important step. Local manufacturers need to improve product quality, production efficiency, delivery reliability, and technological capabilities so that they can meet industrial requirements. At the same time, larger companies can support local suppliers through partnerships, training, technology sharing, and long-term contracts. This collaboration can create a stronger industrial ecosystem rather than simply replacing foreign suppliers with local ones. Industries also need to improve their supply chain risk management. Companies should not only focus on finding the cheapest supplier but also consider factors such as reliability, lead time, flexibility, and the ability to respond to disruptions. Having multiple suppliers from different locations can reduce the risk of production stopping when one supplier experiences problems. Digital technologies can also help companies monitor suppliers and identify potential disruptions earlier.

Strengthening local manufacturing is an important strategy for Indonesian industries facing an increasingly uncertain global environment. Local production can reduce dependency on imports, strengthen the domestic economy, and improve supply chain resilience. However, the goal should not be complete self-sufficiency but a balanced and resilient industrial ecosystem where local and international suppliers complement each other. By improving local capabilities while maintaining strategic global partnerships, Indonesian industries can become better prepared for future disruptions.

References:

  • Asian Development Bank. (2023). Asian Economic Integration Report 2023: Trade, Investment, and Climate Change in Asia and the Pacific. https://www.adb.org/publications/asian-economic-integration-report-2023
  • Belhadi, A., Kamble, S., Subramanian, N., Singh, R. K., & Venkatesh, M. (2024). Digital capabilities to manage agri-food supply chain uncertainties and build supply chain resilience during compounding geopolitical disruptions. International Journal of Operations & Production Management, 44(11), 1914-1950.