Advantages of local sourcing
Build trust and integration with local suppliers
One of the key advantages of local sourcing is that it allows you to get to know your suppliers. Relative to a supplier located in a different part of the world, you can actually meet and build a relationship with your supplier. This can help establish more trust in the relationship, potentially allowing for more long-term investments than may be feasible with more distant suppliers.
Shorter delivery and lead times
Another advantage of local sourcing is that it can have much shorter delivery times or smaller batches. In comparison to a large container that needs shipping around the world, local suppliers can enable quick turnaround or smaller production runs
Allows for just in time manufacturing
The quick turn-around times can also be important to facilitating just-in-time manufacturing. The close location allows small batches with regular deliveries, reducing the amount of inventory in the production line.
Avoids the complexity of dealing with overseas firms, or import taxes
Finally, operations may be simpler dealing with local suppliers, avoiding the need to worry about changes in currency rates, import taxes, or confusion caused by operating in a region with a different language.
Limitations of local sourcing
While there are many benefits associated with local sourcing, there are also limitations that mean it may not be feasible or desirable in all situations.
Items may not be available locally
The first limitation of local sourcing is that every item that is desired may not be available locally. You may be forced to use more distant suppliers because of the limited number of firms that can meet your demands.
Cheaper or more specialized suppliers may be more distant
Even in situations where suppliers are available locally, there may be reasons why more distant suppliers are used. This may include the quality of the goods provided by more distant suppliers being greater, or the prices available being less. Components may be imported from abroad for example, in part because of the lower cost of operations in the overseas manufacturing facilities.