As risks multiply on the world stage and with increasing economic and logistical disruptions, a local supply chain will prove critical for most businesses, according to Lisa Anderson, an expert in manufacturing and supply chain management and president of LMA Consulting Group, Inc.
Local supply chain sourcing, she says, improves efficiency and quality control by enabling quicker responses to customer needs, optimizing production processes, reducing waste, and increasing operational efficiencies between manufacturers and distributors. Below are more advantages, with insights from owners of two growing businesses, and ways that sourcing local can help benefit your business in a big way.
1. It Gives You Greater Control Over Your Materials
Through simple local sourcing and networking, Kim Talebi sought out local farms and foragers for ingredients. The Minneapolis-based CEO and owner of Kaskaid Hospitality – which owns and operates The Butcher’s Tale and other restaurants and catering businesses across the U.S. – loves having access to farm-fresh tomatoes and other produce all year long through working with a local greenhouse. “This makes a huge difference versus using mass-produced, under-ripe tomatoes shipped from South America in the wintertime,” she says.
2. It Reduces Minimum Buys
When you have a local supplier, you can reduce minimum buys because you eliminate the need to fill a container ship, train, or truck. Shipping can be less expensive when your product is being delivered from a local source, so you can offer better prices to customers due to minimized transportation costs and optimized production runs.
“By working with suppliers and hiring workers in my immediate area, I am helping sustain and grow my local community.” —Emily Li Mandri, founder-designer, MLE
3. It Allows for More Flexibility
“For my handbags and jewelry, I work with suppliers and manufacturers based in New York City, which is only a two-hour drive from my studio in upstate New York. I can travel to the city as needed to meet with my factory contacts in person, as well as source materials,” says Emily Li Mandri, founder-designer of MLE. The company's statement accessories have been sold by high-end U.S. retailers and are carried in more than 200 stores worldwide. “I can make the decision to go the same day if I need to; it’s really nice to have that kind of flexibility.”
4. It Reduces the Pressure to Offer Discounts
Since local suppliers can respond to changing conditions more quickly, less inventory may be needed in the end-to-end supply chain. The inventory required to cover for volatility will likely be less if the supplier and manufacturer can work together on win-win solutions to increase agility and flexibility, according to Anderson.
5. It Means a Win-Win for Supplier and Customer
“Local suppliers provide a distinct advantage in getting products to market faster. Product development designs and trials can be done collaboratively for rapid prototyping, testing, and trialing. Additionally, the feedback loop can be direct, speeding up the entire process,” says Anderson. “As problems arise, the appropriate resources can be brought together rapidly to collaborate and overcome bottlenecks. Thus, the new product lifecycle can be dramatically shortened, incorporating additional customer feedback and generating greater growth and a smoother product launch.”
6. It Boosts Your Local Economy
By sourcing local, you can reduce time, fees, and energy usage for transportation. “Also, by working with suppliers and hiring workers in my immediate area, I am helping sustain and grow my local community,” says Li Mandri.
7. It Helps You Get to Market Faster
During the pandemic, when the majority of MLE 's competitors had supply chain issues with China, they had none. “Because retailers were dying for product, we received increased orders from all of our retailers,” says Li Mandri. “Of course, the pandemic was a complete surprise, so we didn’t plan on this. But it benefited us immensely. Moving forward, if we were to get a great opportunity with a large retailer, we could meet demand within six weeks – all because of our efficient co-located supply chain.”
8. It Reduces Paperwork and Administrative Burdens
By sourcing local, you can eliminate the need for export-import paperwork, manual tracking, and complex coordination with brokers to get paid, which can lead to simpler processes and improved employee morale.
Local supply chain sourcing is important for businesses due to increasing risks on the world stage and economic disruptions. When you work with local suppliers, you can reap the benefits of improved efficiency, quality control, and responsiveness to customer needs, while reducing waste and operational inefficiencies.
A version of this article was originally published on April 30, 2015.
Photo: Getty Images