ASSESSMENT ON CHALLENGES OF RAW MATERIALS IMPORT IN MANUFACTURING FIRMS: THE CASE OF HORIZON ADDIS TIRE S.C

Abstract

Manufacturing firms collect input from nearby and far places. Whenever possible, Sourcing in the home country enables companies to avoid numerous problems. However, for many companies, domestic source may be unavailable. Thus, the purpose of this study is assessing the challenges of raw materials import in manufacturing firms: the case of Horizon Addis tire Share Company which is located in Addis Ababa around saris. The company is extremely depending on importation that it is importing 112 types of raw materials (above 90% of its input need). To address this purpose, descriptive type of research design and qualitative research approach has been used. Primary data were collected from top management team through interview while secondary data has been collected from company manual and annual report. Descriptive analysis method was used to analyze the data collected through interview. Major findings of the study indicate that getting foreign currency as per the company requirement to import raw a material is the key challenge. As the result of this, raw materials shortage which limits the product supply capacity of the company and additional costs challenge the company. Using ESLSE for raw materials importation is not optional and this forced the company to pay more sea fright cost and create shipment delay. The finding also shows that Custom & other taxes on imported raw materials is not reasonably encouraging local manufacturers. Though, the company has knowledge and experience in international business, it has still single supplier and doesn’t follow international price trend for major inputs. As the result of these challenges, the price of the company product is not competitive as locally produced product and could not use the production capacity to increase the market share. Finally, the researcher recommended to the company to have its own currency source by exporting its product at least to COMMESA market and work on how to get the major input (Natural Rubber) from local source to address FCY shortage. Import transportation should be opened to manufacturers instead of depending only on ESLSE. The company needs to make its suppliers at least two and follow international market price trend for each material. As the company employee more than 800 workers, add more than 30% value and substituting imported tires, custom tariff should be minimized and vat and withholding tax refund time should be shorten.