In this global economy, it’s easy to look far and wide for sourcing, especially when the information is at the tips of our fingers. Modern supply chains are built around international sourcing philosophies. Historically, by importing materials and products, a company could reduce their production costs. However, if you are a business looking to source materials, local domestic options may be in your favour.
When looking at sourcing options, business buyers would generally prefer to buy products that are sourced locally. Interestingly, nearly half of suppliers would prefer to partake in local supply chains rather than a global one. This means there is support from both sides of the equation for domestic sourcing.
Overcoming Geographical Boundaries
Local sourcing provides benefits for both buyers and suppliers. By keeping sourcing activities domestic, it is a good for the local economy and community. Materials have less distance to travel, which has the potential to be more environmentally friendly. In addition, domestic relationships can be built easier as face to face interaction can be frequent; it is less cumbersome for buyers and suppliers to travel to each other. This means buyers can visit the supplier’s warehouse and have the opportunity to inspect products faster.
In global sourcing, a buyer might have to wait weeks for a sample to come through before a full shipment order can be placed. The distance can cause further obstacles. If there is inclement weather or controversies at the port, shipments might not make it out in time. Delays in domestic shipments are less likely. In addition, unstable or corrupt governments do not pose threats to shipments.
When shipping overseas, buyers will have to deal with logistics services that transport products by ship or plane. Logistics companies can add a large cost margin to your product. If businesses opt for domestic sourcing, they can avoid hefty logistics fees for overseas transport.
Enhancing Inventory Control
Inventory control can be much easier when you source domestically. If inventory levels run low unexpectedly, you may be able to negotiate a quicker shipment from your supplier. This means inventory control problems can be remedied by shorter turnaround times from a domestic source. In addition, inventory control can increase stock levels around busy times and holiday seasons without worrying about products getting held up at customs or stuck somewhere along the supply chain. Lead time is reduced and they are able to get products to market quicker.
From a consumer perspective, more and more people are looking for locally sourced products. People are becoming very conscious consumers and want to know where their goods are coming from. With domestic sourcing, they are able to hold the companies liable to upholding ethical conditions and business. They want to ensure workers are getting paid fair wages and in a healthy environment. It is much easier to regulate these issues on a domestic level than overseas. Domestic sourcing can also enhance credibility with their customers.
Domestic souring yields more control throughout the supply chain. This decreases the chance of supply chain risk. It is much easier to manage quality control in a domestic environment. Often overseas sourcing results in a product that does not uphold your quality standards. The foreign exchange market can result in currency fluctuations. If the change is significant enough, it can impact the price of your goods.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.