COVID-19 has raised endless questions about the future of procurement and the way organisations run their supply chains.
To better mitigate risk and avoid major disruptions in the future, economists predict a shift towards a circular economy, which includes an emphasis on buying local.
What are the main benefits of buying local?
1. Boosting the Australian economy
Research shows that the economic multiplier from buying local is four times higher than buying from a non-local source. According to the Australian Made campaign, $333, 900 worth of tax revenue is made and 10 full-time jobs are created for every $1 million invested in domestic manufacturing.
2. Supporting and enriching local cultures
Cultures, customs, and traditions are often reflected in and preserved by domestic businesses. This might, for example, include the use of local produce. When procurement prioritises buying local they contribute to the long-term prosperity of these businesses, driving product diversity in a globalised world.
3. Offshoring is becoming less cost-effective
Not so long ago, there was no question that offshoring was the most cost-effective way to run supply chains. But in today’s world, there are several factors making offshoring a less attractive option. This includes:
- Rising costs in developing countries.
- Global trade conflicts resulting in high tariffs.
- Disruptive global events including natural disasters and global pandemics.
- Compliance and regulations can be more easily aligned between buyer and supplier when buying local.
- The paperwork required for overseas shipping is time-consuming and complex
When it’s possible to source products, parts, and services locally, organisations should be weighing up the pros and cons of reshoring. For example, does a small difference in cost outweigh the advantages of reclaiming much greater control of the supply chain?
4. More meaningful supplier relationships
It’s absolutely possible to build long-lasting and meaningful relationships with overseas suppliers, but it’s so much easier to do so with a local supplier. Negotiations can take place in person, visiting factories is straight forward (and can happen on a regular basis), buyers are more likely to receive a personalised service, and any issues or queries can be quickly resolved because everyone is in the same time zone.
Not only will these factors contribute to the production of a higher quality product, but it also means manufacturing turnaround can much faster, giving procurement the luxury of being able to respond to demand spikes and evolving consumer trends.
5. Driving sustainability
A shift towards buying local is a quick and easy way for procurement professionals to reduce their organisation’s carbon footprint. Delivery and transportation times will be significantly reduced, as will the frequency of corporate travel. Lessening shipping time concurrently reduces storage time, which ultimately reduces energy useage.
A commitment to operating sustainably improves an organisation’s reputation, driving new customers and retaining existing ones.
6. Reduced supply chain costs
Within complex, global supply chains, logistics costs can be staggeringly high. Consolidating the supply chain with a focus on localisation is a great way to reduce procurement’s spend without having to cut corners on important factors such as sustainability.
7. Increased reliability
Operating a shorter supply chain means less risk and a more reliable service. An overseas supplier can’t hope to promise certain delivery times in the middle of a global pandemic or in the aftermath of an earthquake. A local supplier will likely be able to deliver a more consistent service.
