The world is extremely globalized and interconnected today, as are supply chains. A tremendous number of companies rely on outsourcing and offshoring suppliers, whether it’s manufacturing or retail business. Offshore locations are often utilized because of the massive price gap compared to American or European suppliers and manufacturers. However, the global pandemic made enterprises rethink their supply chain models. Many businesses have suffered severe disruption because the majority of their sourcing and production was concentrated in China or other locations that had become unavailable for a certain time. Because of this, there is an emerging trend in the industry: local supply chains.
What is a local supply chain and what are the benefits for your business?
The local supply chain implies having regional suppliers and manufacturers in an area very close to your main location. This model can be especially beneficial to small businesses in the US. During the coronavirus, small businesses were hit hard with the economic impact and being cut off from their foreign suppliers. All of these factors forced American entrepreneurs to think about how to save their business and support the local community of suppliers, manufacturers, and retailers. The answer was collaborating with them.
Because of the extreme globalization, many have forgotten that they can run their business with a handful of local partners. The first counter-argument that immediately emerges from this statement is the higher cost of cooperating with local suppliers. However, as a small business, you have more flexibility in terms of prices and communicating them to your customers. Additionally, local supply chains can provide many benefits to your business by:
- Complete supply chain visibility with no hidden costs, as everything operates within an accessible area
- Reduced production and delivery risks
- More control over inventory and stock, including control over costs
- Ability to maintain profitable on-demand production without overstocking
Ultimately, switching from global to regional can be not only a socially responsible decision but a profitable one. While working with local manufacturers and services can be more expensive than outsourcing, you get more control and flexibility over the entire supply chain, which in turn can drastically reduce supply chain costs.
It is also good for your brand image and customer awareness. Personalization has become one of the top trends in 2020 and helping communities counts as extra bonus points. People all over the US were encouraged to support the community and buy from locals. By choosing this model, you present your business as innovative and socially responsible.