Local Sourcing — The Ultimate Guide of 2022
Local sourcing is used by many organizations, especially local businesses. For professionals in the field of procurement, local sourcing is one of the processes that they learned at the start of their tenure.
In this article, we will talk about local sourcing. Especially to those who just started their journey to help them in procurement. We will also check how local sourcing differs from global sourcing.
Once you read this article, you will have an in-depth knowledge of local sourcing. You will also know how it can benefit you allowing for your business to develop more.
What is Local Sourcing?
Many professionals are familiar with local sourcing. However, we will explain local sourcing to people who just started their careers in procurement.
Local sourcing is a process that refers to acquiring materials or products from manufacturers within the country. Instead of sourcing international supplies, the business opts to buy from local manufacturers.
Local sourcing often comes with a higher price compared to sourcing for international supplies. But for some, it is more easy and fast than sourcing globally.
If your demand is increasing, it is much safer to lean on local suppliers. Since local suppliers can deliver your needed products for manufacturing within a certain timeframe.
What is Global Sourcing?
Global sourcing is the process where an organization sources goods and services across geopolitical boundaries. In simple terms, Global sourcing finds suppliers to buy their goods in the international market.
This strategy is often used by big businesses to save money by finding cost-effective locations to manufacture products.
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Difference Between Local Sourcing and Global Sourcing
Advantages of Local Sourcing
When the pandemic happened, it disrupted the flow of the supply chain, especially for companies that source internationally. This has affected the way professionals see global sourcing.
The pandemic has increased the pressure on essential products that had led global sourcing to struggle in meeting the demands. In local sourcing, the supplier is usually reactive. This allows the supplier to ramp up its supplies to meet your demands.
2. Better control
When the supplies are far away from you, you will have less control over them. Suppliers overseas may say that they treat all customers the same. But it is far from reality, especially if you are not on their list of priorities.
In local sourcing, you can conduct face-to-face visits to address all the concerns regarding the supplies. This ensures that all the products you will receive meet your standard.
3. Reduced costs
If you can source your materials locally, then you can cut costs in your supply chain. If you localized some of your supply chains, you can reduce your costs as less money will go to shipping costs. Additionally, there will be fewer expenses in storing your supplies in a warehouse.
4. Good for the country where it resides
Sourcing locally will not just help you but also local manufacturers and suppliers in your area. Thus, they will develop that can contribute to the country’s economy.
As the business of manufacturers and suppliers grows, they will be more likely to contribute to communities. They can do this through fundraising and sponsored events.
5. Helps the environment
When you reduce shipping and storage, you also reduce the emission and carbon usage. This will help the environment to bounce back from its former glory.
Businesses nowadays are increasing their positive brand awareness. Most businesses are selling eco-friendly products as consumers begin to be wary of their participation to combat climate change.
6. Faster launching of products
Companies that source locally benefit from working with manufacturers and suppliers in the same time zone.
This allows for an easier mode of communication that results in resolving problems quickly. Through this, the company can launch its products rapidly to meet consumers’ demands.
Disadvantages of Local Sourcing
1. Some materials are not available locally
Not all items are available locally. Some materials or supplies are only exclusive to a specific country.
Some raw materials only grow or can only be obtained when the conditions are met such as temperature and climate. Because of this, you have no choice but to source for suppliers internationally.
2. Cheaper suppliers are found overseas
The quality of materials by more distant suppliers can be greater and cost less than what you can find locally. Due to this, many businesses source overseas.
Commonly, the cost of operation in China is lower than in any other country. This attracts many businesses to do business with them.
3. Fewer economic scale
Small suppliers have fewer economic scales. As they are starting, they can only meet a certain amount of demand unlike what you can find overseas. That is why businesses source for manufacturers that can match their demand.
Frequently Asked Questions
1. What is local sourcing?
Local sourcing is the method of finding suppliers or manufacturers who can produce your needed materials locally.
2. What is global sourcing?
Global sourcing is the method of finding suppliers globally to buy the materials they need to produce their products.
3. What is better between the two?
No sourcing is better than the other. This depends on what risks you can take and the industry you are into.
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