In an increasingly interconnected world, global supply chains have become an essential component of trade for businesses. However, recent challenges around the likes of Brexit, the war in Ukraine, rising costs for businesses, the pandemic, and natural disruptions have highlighted the vulnerabilities of being heavily reliant on extended supply chains.
In this blog, we delve into the concept of localising supply chains, as more businesses look to explore its effects on long-term organisational resilience.
Why localise?
Localising supply chains involves shifting the focus from distant, global suppliers to ones closer to home, therefore reducing reliance on international sourcing. More businesses are exploring localisation as a strategic solution, due to the increased complexities of modern supply chains. By exploring the availability of local suppliers, companies can enhance their responsiveness, reliability, and cost efficiency.
This approach can offer several advantages. Firstly, it enhances resilience by minimising an organisation’s exposure to global events that could disrupt the supply chain. For instance, if a natural disaster or political conflict impacts a distant supplier, businesses can quickly pivot to another local supplier, therefore reducing downtime and maintaining operational stability.
Localisation also improves responsiveness. With suppliers in close proximity, businesses can react quickly to changes in demand or shifts in consumer preferences. They can also communicate more effectively with suppliers, leading to stronger relationships, better co-ordination, and enhanced problem-solving.
Additionally, localisation can result in significant cost savings. Having shorter distances for products or materials to travel means that businesses can benefit from a reduction in transportation costs, which can have a considerable impact on their bottom line. A localised supply chain is also more sustainable, as it reduces the carbon emissions associated with long-distance transportation, and positively improves business’s ESG values.
The impact of disruption
When supply chain disruptions take place, it is more than just the lead-time that is affected. Worldwide disruptions can lead to shortages of key goods, making it impossible to fulfil orders. Price inflation drives up the cost of materials and in turn the price of products. And outcomes such as factory closures can have a domino effect on the entire supply chain, creating ripples across the entire economy. More often than not, these global disruptions not only affect individual businesses, but can impact entire sectors or countries at a time.
We saw this predominantly during the pandemic, as global supply chains faced significant disruptions. Not only that, but businesses also had to adapt to meet immediate demand for certain products or take on the responsibility of distributing PPE and face coverings. We saw huge retailers such as Amazon working as distributors for home testing kits and meeting demand for usual household products that people needed when isolating, alongside their regular customer or client orders. This underpins the importance of having a resilient supply chain that can withstand shocks and continue to operate effectively.
Navigating disruption
Disruptions to global supply chains are no longer a matter of ’if’, but rather ’when’. From trade wars to natural disasters, the interlinked nature of our global supply chain means disruptions are guaranteed to occur. However, by localising supply chains, businesses can better navigate disruptions and reduce their impact. Here's how:
- Variation: By diversifying suppliers across different regions, businesses can minimise the risk of disruption. With local supply chains, it becomes easier to switch between suppliers when one is experiencing difficulties. This means businesses can always ensure a steady flow of materials and minimise the impact of disruptions for their customers/clients.
- Data-driven decision making: Leveraging data and analytics can play a crucial role in managing your supply chain strategically. By analysing historical trends, demand patterns, and supplier performance, businesses can anticipate potential disruptions and proactively take steps to reduce their risk. This can include sourcing local suppliers to ensure customer orders are still always met on time.
- Collaboration: Improving your procurement customer experience (PCX) can enhance your relationships with suppliers, so that you can become more collaborative partners. Developing strong partnerships with local suppliers is essential for navigating disruptions. Regular communication, joint contingency planning, and shared knowledge contribute to a more resilient supply chain ecosystem that can adapt and respond effectively to unforeseen circumstances.
Embracing resilience
Troubles in recent years caused by global events have served as a wake-up call for businesses all over the world. The need to embrace resilience and ensure continuity has never been more crucial. Organisations must have the correct processes in place to ensure they can adapt quickly in the face of adversity. By combining global perspectives with local expertise, companies can create supply chain networks that are both efficient and robust.
The journey towards building a localised supply chain will pose its own unique challenges, such as identifying reliable local suppliers, building trust with said suppliers, and negotiating costs. But the long-term benefits will far outweigh the initial investment in time and money.
Paving the way for success: How can Advanced help you?
Organisations who are looking to build a more resilient supply chain will need to have better strategic control and visibility over their entire network. One of the ways to do this is by investing in digital tools and software that can enable them to utilise their data insights more effectively, organise their supplier/contract management data, and gain a better overview of their supply chain processes.
If organisations are looking to localise their supply chain, they must start on the right foot, with the ability to easily manage and oversee any new suppliers they onboard, while also building strong relationships within these partnerships. Having a good system to collaborate on, such as those within our Advanced Spend Management suite of products, is a good place to start. With a strong, user-friendly platform to work on, information is easily passed from supplier to business and vice versa. It also makes you more enjoyable to work with, so you become the preferred choice to partner with.
Our Advanced Supplier Management and Advanced Contract Management solutions are able to capture all of your supplier and contract renewal data in one place. This level of visibility is essential for businesses looking to strengthen their supplier processes because it allows them to see where money is being spent, both in terms of what on and who with. This also helps businesses to act quickly in the face of disruption as it becomes clear when they should negotiate a better price, or to switch to other products/materials that maximise success.
For more information on how Advanced Spend Management could help to strengthen your procurement and supply chain processes, please visit: Spend Management software | Advanced (oneadvanced.com)