Local Sourcing — The Ultimate Guide of 2024

What is local sourcing?

• Local sourcing refers to the process of acquiring materials or products from manufacturers within the country.
• Local sourcing is more flexible and offers more control while boosting the local economy.
• Local sourcing brings shorter lead times and faster communication with suppliers.

What is Local Sourcing?

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 easier and faster 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. 

I have created a free-to-download editable procurement process: 7 steps template. It’s a PowerPoint file, together with an Excel file, that can help you with your local sourcing process. I even created a video where I’ll explain how you can use this template.

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.

Difference Between Local Sourcing and Global Sourcing

Both global and local sourcing are different, but some do not see the fine line between the two. Here’s a table that shows the variations between two terms:

Advantages of Local Sourcing

Sourcing globally has its perks, but there are also notable benefits should you source locally. Here are a few advantages:

1. Flexibility

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 to meet 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 standards. 

3. Reduced costs

If you can source your materials locally, then you can achieve cost reduction 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 emissions 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 in combatting 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

Since local sourcing only covers a limited area, there might are also a few disadvantages. Below are some of them:

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.

Conclusion

Local sourcing often brings up the misconception of being overpriced and of poor quality. However, that is not always the case.

Although, sometimes it indeed costs bigger to source locally because of the scarcity of materials, we should not diminish the fact that it also saves money for shipping and delivery.

Moreover, even though, there are a few disadvantages, there are notable benefits in local sourcing that includes saving time, effort, and money.