Your supply chain is an integral part of your company’s operations plan. Putting all your eggs in one basket with just a few suppliers is usually a bad idea. One hiccup with a single vendor could delay production and shipping, putting your business in a major bind. Likewise, an overdependence on non-local suppliers could also strain your operations.
Dock strikes and global pandemics have revealed the vulnerabilities of international supply chains. Sourcing from local vendors instead builds resilience against these liabilities that are out of your control. Partnering with local suppliers brings additional benefits and ways to boost your business. Learn about four of them below.
1. Scale Production More Efficiently
Your company’s production train has been chugging along for the past year. Everything is running smoothly, but then you secure three new clients out of the blue. They all want orders shipped out within the next month. If you source your ingredients from far away, will you be able to make the deadline?
Probably not. The further a vendor is from your location, the less likely they’ll be able to respond in time. Yet, local ingredient suppliers could react with increased urgency to help you get what you need to ramp up production.
Delivery doesn’t take as long when your vendor is down the street or in the next town on the map. It’s also easier for them to coordinate the delivery of larger orders. Local vendors are likely going to have more reliable, shorter supply chains.
Understanding how to find a manufacturer nearby can play a key role in efficiently scaling production. Local suppliers are often invested in the community, including other businesses, and they’re familiar with the landscape’s challenges, needs, and markets. This close proximity increases the chance of face-to-face collaboration.
If you’re not satisfied with the partnership, an in-person meeting isn’t out of the question. Plus, with closer proximity, both sides can experience each other’s operations firsthand, leading to a greater understanding of what’s at stake.
Using a local supplier can also have positive effects on quality control. Ensuring the material or product quality is much easier with a local supplier, as there’s more transparency in the production process.
2. Streamline Costs
A Boston Consulting Group survey discovered that 65% of executives are now prioritizing supply chain and manufacturing costs. In a nutshell, these expenses are moving to the top of the chopping block, ahead of overhead costs.
Business leaders are recognizing the effects disruptions, including new tech like generative AI, can have on operations. They want to get ahead of the game by streamlining costs to make their ops more resilient.
Sourcing locally is an effective way to accomplish this goal. You’re not spending as much money on distribution costs from suppliers down the road. Contrast that with the added expense of shipping raw materials and goods from an overseas supplier. Not only do you have the additional shipping expense, but you might also be dealing with tariffs.
Besides the costs on the books, there are hidden expenses associated with longer shipping times. Products may have to move through several distribution points, including warehouses. Anything can happen to items along the way, such as damage and deterioration.
In addition, your customers have to wait longer to get what they ordered and it’s likely they won’t be happy with that. Local supply chains mitigate these hidden costs since distribution paths are shorter and more efficient with less storage time.
3. Support the Local Economy
Have you noticed how one business closure can have a domino effect? The local economy is impacted, sometimes heavily. Other companies and stores start to close down or move operations to greener pastures. Regional unemployment skyrockets, further exacerbating the local economic difficulties.
Supporting other local businesses through your company’s supply chain creates a regional buffer. With contracts in place, you’re helping other nearby organizations stay afloat. This support, in turn, ensures residents keep their jobs. A stronger local economy means your company is in a better position to grow as well.
When the economy is stable, it means fewer residents leave the area. Cities can generate the tax revenue needed for the upkeep of public property, such as parks and roadways. Home values don’t depreciate at an increased rate. The community maintains an attractive image with the ability to attract new residents.
Local businesses have a chance to grow as the region’s needs accelerate. Working with other local businesses demonstrates a commitment to community development. This could appeal to consumers who value local businesses, leading to an enhanced brand reputation within the community.
4. Increase Sustainability
Younger generations may not be the only consumers out there. However, the purchasing power of Gen Z and millennials is expected to surpass Baby Boomers’ spending by the year 2030. Consumers from these younger generations value business practices associated with sustainability. They’re 27% more likely to purchase from companies that care about their impact on the environment.
When you source locally, you’re increasing your company’s sustainability. First, it takes less fuel to move ingredients and supplies within the same region. Second, there’s less chance products will need to be in warehouses and storage facilities. These buildings need energy to run.
Fewer facilities in a distribution network mean less energy use. You’re not adding to your business’s carbon footprint, you’re reducing it. It’s a way to build trust with consumers who value sustainability and want to support companies with environmentally sound practices. Your business can also look for local suppliers with green manufacturing practices to partner with.
It’s also easier to audit and ensure ethical and sustainable production standards with suppliers that are right down the road.
The Advantages of Local Supply Chains
How you structure your company’s supply chain can become either a liability or an asset. While globalization has some clear advantages, distributing products across international lines isn’t always the best solution. Joining forces with other local suppliers can create competitive advantages and mitigate risks.
Some of those benefits are the ability to scale production efficiently and increase environmental sustainability. Fueling the local economy is another gain, which can end up bolstering your company’s growth. Whether you’re looking for your next supplier or want to overhaul your entire network, choosing local partners can become a win-win.
