Whether for social reasons, such as cutting down the distance that goods travel and thus the environmental impact of transportation, or to try and get a most just-in-time supply chain, there can be benefits of sourcing inputs locally. Moving to a local supply chain is not always easy – this article explores how firms can go about starting to increase the proportion of goods sourced locally.
Understand your own operations
When considering your sourcing, it is important to actually understand where your products come from. Examine all key resources and get a sense of which are the largest elements, and how far are they actually traveling. For some goods, that potentially have a local supplier, the actual distance traveled may be much greater than just from that supplier. Some goods may travel around the world prior to reaching your supplier.
Prioritizing goods for local sourcing
Once you have got a sense of how far the goods are actually traveling (including stages prior to your supplier in the overall supply chain), you can start prioritizing which goods you want to source locally – potentially those that you buying the largest volumes, or currently travel the furthest distance.
Identify local suppliers
A key barrier to local sourcing can be the challenge of not knowing who your local supplier could be. Thus, it is important to start to research alternative suppliers in your local region. While there may be some that directly supply the input that you require, there are potentially others that could be worked with to long-term build up the capabilities to supply your needed inputs.
Consider a business case that can help offset any price increases
While there may be some costs savings associated with local sourcing (the goods have to travel a shorter distance, thus potentially saving on transportation costs), it is possible that some input costs may be higher than when sourcing at the global level. Thus, it can be useful to think beyond the direct costs associated with the input to develop a business case for moving to local suppliers. For example, would local sourcing increase your responsiveness to increased demands or allow you to charge a higher price on your goods?