In 2021, we saw the pileup of ships as the MV Evergreen, a skyscraper-sized cargo ship, ran aground in the narrow transcontinental waterway causing a global logjam. At least 150 other vessels had to idle as authorities freed the ship using dredgers, digging, and the aid of high tides. But by then, millions of dollars of worth of sales had fallen by the wayside.
Now, picture a local supply chain where producers, suppliers, and distributors are all located close to the point of consumption, be it a manufacturing plant, a distribution center, or directly to the consumers. Local supply chains cut down on transportation costs, improve delivery times, and allow for more flexibility within the supply chain.
Global vs. Local:
We all know how many shippers went global with their supply chains, setting up facilities in far-off lands like China, Taiwan, Indonesia, and Colombia. It seemed like a smart move to offset production costs until they faced a major buzzkill – extra-long wait times for goods to arrive and millions of dollars in sales slipping through their fingers.
The Perks of Going Local
- Reduced costs: Local suppliers often charge less than their international counterparts due to lower transportation and related expenses. The actual price of the goods might be a tad higher, but it’s always economical to move them within the local network.
- Improved supplier relationships: Working closely with local suppliers can foster better connections leading to improved service quality and better long haul.
- Increased flexibility: When your suppliers operate in the same market as yours, they empathize with your pressures and strains. So when things go off track, they’re right there to help you with everything without waiting weeks.
- Enhanced customer service: Sourcing materials and services locally means you can provide top-notch customer service. And today’s consumers demand transparency, especially related to sourcing.
How to Localize
- Find locally sourced materials: Remember, not all locations are created equal. If you’re, say, a diamond distributor, setting up shop in a place where diamonds don’t naturally occur is a no-go. Look for regions nearby that can supply what you need within a day or two.
- Diversify your portfolio: After the rollercoaster ride of the pandemic, diversification is the name of the game. Start small by getting regional suppliers on board to work alongside your international partners. Test the waters, and once you’re confident, start tapering down those overseas operations.
- Get into the nitty gritty: Ask tough questions when scouting for new local partners. Dig deep into their production capacity, lead times, and ability to meet current and future demands.
Complications of Supply Chain Localization
- Limited resources: If the materials you need for manufacturing don’t naturally occur nearby, localization might be tricky. Finding local alternatives can seem like searching for a needle in a haystack.
- Expertise gap: Local suppliers may not have the same expertise as their global counterparts. This can affect forecasting demand and create supply chain upsets. But with good communication and collaboration, you can overcome this hurdle.
- Technology access: Global suppliers often have access to advanced technology that streamlines processes and improves communication. Local suppliers might be playing catch-up in this regard.
Maintaining Your Local Supply Chain
- Establish clear goals: Set those goals both internally and externally. Keep track of key performance indicators (KPIs) and stress the importance of meeting metrics with your partners. And don’t forget to plan for the future – is this a long-term partnership or a shorter-term arrangement?
- Embrace technology: Encourage your local partners to integrate with your systems for seamless data flow from the materials’ origin to the end consumer. Trust me; technology can be a game-changer!