How to grow in a crisis? Import substitution strategy from a domestic manufacturer
Despite the difficult situation with the supply of raw materials and logistics, a number of Russian companies have maintained and even increased production. The cable industry used to feel quite confident and independent, dominating the Russian market. Nevertheless, the relevance of import substitution in Russia has sharply increased against the background of the changing economic situation, but the issue of replacing foreign products with goods of Russian manufacturers has been raised before.
Sergey Lebedev, CEO of Group Atlantic Teplolyux LLC, spoke about how to implement an import substitution strategy using the example of his company.
"Our company adopted an import substitution strategy 2.5 years ago. Thus, during this period, Teplolyux successfully implemented 11 projects for the introduction of both completely new and updated products based on components manufactured and purchased in the Russian Federation, which were previously supplied from abroad.
Almost all components for cables are manufactured in Russia: both metals and plastics. There are, of course, specific products, such as high-temperature cables, the materials for which were imported from Europe and Asia. The company experienced some difficulties at the end of February and March due to the refusal of European and Japanese companies to continue working with Russia. But the market is wide, we have found analogues that even surpass the materials whose supplies were stopped. In fact, the current situation has become an occasion to reconsider the designs and materials that were used earlier and find more modern options. Therefore, the cable direction feels very good. If the country continues to have the same need for cable, everything will be fine.
For example, a foreign supplier of one of the key components of cable and wire products - heat–resistant insulation material - after a series of successful tests was replaced with a product from a Russian manufacturer. At the moment, together with domestic chemical technologists, work is underway to modernize the formulation of plastic, taking into account the technological features of the material used earlier, which in turn will have a positive impact on the process manufacturability.
An identical scenario has been implemented with a number of foreign suppliers of extrusion and injection molded plastic. The previously supplied thermoplastic elastomer from the USA and Germany was replaced with a material from a Russian manufacturer.
Alternatives to Austrian-made cross-linked polyethylene have also been found on the territory of the Russian Federation, and we are completing the necessary tests to launch mass production.
If we talk about electronics, then everything is not so clear here. For some time we had problems related to the supply crisis. This concerned both logistics and the general shortage of electronics, and now they began to refuse us altogether. It is simply impossible to replace Western products with Russian analogues, because we do not produce them yet.
We design and manufacture our own products, but the chips are supplied from other countries. Teplolyux had to, while maintaining the case, actually reinvent products on a new electronic platform: to re-breed the boards and rewrite the programs. But in general, we are coping with these tasks, although the crisis, of course, is not over yet - the company regularly receives new refusals, and often under already concluded contracts.
The difficulties that arose required new investments, as it was necessary to buy components more expensive and contract for a longer period. But we see a good increase, because the quality has not deteriorated, and we are closing the resulting shortage of electronics due to the withdrawal of Western competitors from the market with our products.
In terms of revenue, the company is also ahead of plans. At the moment, prices for our products have actually reached the pre-crisis level and even in some positions have become lower. This is especially true for products that are made from Russian raw materials.
In addition to materials, services are also subject to import substitution. In particular, in recent years, the Group Atlantic Teplolyux enterprise has almost completed the stage of changing the company that carries out regular maintenance of production and technological nodes from China to a Russian enterprise. Thus, the growing volume of orders within the country contributes to the entry of the Russian manufacturer to a new level.
An additional fact of the effectiveness of the import substitution program is the receipt of the next annual certificate of expertise in the Chamber of Commerce and Industry. This allows us to continue to issue certificates of origin ST-1, confirming that the shipped products are Russian-made. The availability of certificates of origin for shipped export products, in accordance with Government Resolutions 311 and 312 of 09.03.2022, prohibiting and restricting the export (export from the territory of the Russian Federation) of certain types of goods until 31.12.2022, gives us the opportunity to export products. A very large range of our products has been included in the lists of goods prohibited for export, and without certificates of origin, export in 2022 would be practically impossible. We have not lost our customers abroad.
The chosen import substitution strategy of Group Atlantic Teplolyux has not bypassed the IT sphere either. Since the end of 2021, all processes within the company have become more reliably controlled by switching to 1C ERP, which successfully withstands long-term competition with foreign manufacturers: Microsoft, SAP and Oracle.
In particular, thanks to the effective import substitution strategy, the R&D center of the enterprise annually develops new types of products and produces a wide range of solutions for a comfortable and safe life, including all types of electric underfloor heating, anti-icing and snow-melting systems of ramps, roofs, open areas. The products of Group Atlantic Teplolyux are represented in many large DIY networks, are popular with developers, installation companies, large distributors, as well as in municipal institutions.
Using the example of the Group Atlantic Teplolyux company, we can conclude that today business enterprises are much less dependent on Western goods due to the chosen strategy, which allows our manufacturers to increase serious competition with Western companies."
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