Cash Management · June 09, 2022

Benefits of Local Sourcing for Your Supply Chain

Businesses have long been accustomed to sourcing their supplies from across the globe. Whether it was focused on quality, price or convenience, the interconnected supply chain almost always made it possible to find far-flung sources for the necessary supplies to conduct business.

Unfortunately, all of that changed with the COVID-19 pandemic. The global supply chain began experiencing delays, shortages and outages when the pandemic caused a sudden disruption to the old way of doing things. Many businesses had to turn to local sourcing rather than their usual supply sources.

While switching to local sourcing for your business needs may cause some growing pains, there are some undeniable benefits. Here's how using a local source for your business supply needs can benefit your business.


Reduced costs

While many businesses source their supplies internationally to save money, this practice may be more costly than you realize. To start, the cost of transporting your supplies from another country adds to the price you pay, as does the potential cost of delays if there's a supply chain issue. You may pay less per unit for the widget you ship in from halfway across the world, but how much is the cost of shipping those widgets—and how many sales do you lose when the shipment can't make it to you?

Additionally, if you're sourcing from a country with a different currency, you have to deal with the fluctuations of currency exchange. While a fluctuating currency value may sometimes mean you're spending fewer dollars to get more widgets, it can also go in the other direction. If you source from a local supplier, both you and the supplier will always be using the same currency—and you'll get the same value for your dollar.

Increased flexibility

Having a sudden large order is any small business's dream come true. But if your business relies on supplies from far away, you may not have the flexibility to fulfill the order because you'll be beholden to your supplier's schedule. A local supplier, however, is more likely to be reactive and may be better prepared to ramp up production to help you meet demand.

You'll also be better able to communicate with a local supplier. Not only will you be in the same time zone, but you'll also be able to visit the site and speak to your supplier personally. This reduces the likelihood of miscommunication and missed connections, which can help you manage your business more efficiently.

Enhanced local business support

Sourcing your supplies locally means keeping money flowing into your community. You can help increase the revenue of local suppliers, which helps the community both in terms of local employment and tax revenue.

This can also create a better local economy for everyone because both employment and local taxes can go toward making a community more desirable—and lead to greater community investment from all sides.

Fewer environmental costs

By supporting local businesses, you're reducing both transportation and environmental costs for yourself and your supplier. While lower transportation costs will have a direct financial impact, reduced environmental costs can also be financially beneficial. Many consumers want their shopping decisions to be environmentally friendly, so you could advertise that you've switched to a local supplier to entice more eco-conscious consumers.

Businesses may be accustomed to sourcing their supplies from anywhere, but sourcing locally can help improve your bottom line, business flexibility, local economy and the environment. Partnering with local suppliers can be a great way to pivot during the supply chain crisis. Plus, it's a savvy business decision.

Insights

Financial insights for your business

No results found

This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.

Links to third-party websites may have a privacy policy different from First Citizens Bank and may provide less security than this website. First Citizens Bank and its affiliates are not responsible for the products, services and content on any third-party website.