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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Local Sourcing — The Ultimate Guide of 2024

Key takeaways

  • In simplest term, local sourcing is 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.

Local sole 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 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. 

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:

Local Sourcing
Local sourcing intends to procure supplies within the country it is located.
Local sourcing allows for control and a shorter lead time of materials.
Quicker communication with the supplier as they are in the same country.
Offers sustainability in times of international political conflicts.
In local sourcing, there are limited available resources.
Global Sourcing
Global sourcing aims to procure suppliers in the international market to find the best prices.
Global sourcing is more cost-effective as you have a wide list of potential suppliers that provide materials for much lower prices.
Might take a long time to solve problems with their supplier as they have different time zones.
Political unrest can cause disruption to its supply chain.
The availability of resources is much higher than local sourcing.

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 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

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.

Frequently asked questions

What is local sourcing?

Local sourcing is the method of finding suppliers or manufacturers who can produce your needed materials locally.

What is global sourcing?
Which 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 in.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics