As COVID-19 upended the supply chain, demand surges, inventory shortages and reduced productivity have all led to significant delays. Despite this upheaval, one thing has remained constant: consumers’ expectations for on-time deliveries.
As a result, shippers have begun seeking ways to stay a step ahead, adjusting to the “new normal.” Many companies have turned to localization—in other words, bringing the supply chain closer to a business’s primary location and/or areas of high demand. This can create smoother, more streamlined operations.
Read on to learn how localizing the supply chain can help your business, and explore some of the key benefits.
What Does Localizing the Supply Chain Mean?
Localizing operations requires a holistic approach to assess every aspect and step of the supply chain—from the initial raw material sourcing to final distribution. This represents a significant shift from the traditional “one-size-fits-all” approach, in which a company’s products, marketing, store setups and the supply chain itself were standardized across locations.
Today’s consumers expect a more unique, personalized experience. By tailoring logistics and the supply chain to different markets, localization allows businesses to appeal directly to specific customer segments. This may mean sourcing materials from nearby regions rather than internationally, or fulfilling orders from multiple locations in order to reduce time to delivery.
Some retailers also tailor product lines to certain store locations based on local customer demand. For example, your data may show that customers who shop at a particular store location are more likely to buy expensive, niche products than customers at another location, who are likely to focus on more affordable, everyday items.
Or perhaps a certain brand of hot sauce appeals to customers at one location, while customers at a different store prefer another. Rather than having the same amount of each product in stock at both stores, you may want to adjust inventory levels to match actual demand.
Even seemingly small adjustments—like altering store layouts or switching up product packaging to better match consumer demographics or preferences—can help set your brand apart.
How important is it to your business to localize the supply chain?
What Are the Benefits of Localizing the Supply Chain?
Localizing the supply chain can offer a wide range of benefits, including:
Moving operations closer to home or bringing them back to U.S. shores from abroad—or “reshoring”—can result in significant cost savings. When you have a supply chain that operates within an accessible area, overall visibility improves, and hidden costs can be eliminated.
For example, many businesses source parts and materials from across the globe; these resources must be stored abroad, then shipped many miles to reach their destination, involving several different partners along the way. With a localized chain, this entire process can be streamlined and costs reduced.
Local suppliers tend to be more communicative and reactive than suppliers located farther away. This means it’s simpler and faster to identify supply chain issues as they arise, adapt to disruptions, and adjust inventory in real time.
For instance, if demand spikes in a certain region, a localized supply chain makes it easier to ramp up production and get products delivered quickly. In the age of COVID-19, flexibility and adaptability are more important than ever.
When the supply chain is local, it’s also easier to maintain oversight and control over every step. Because it is easier to form personal relationships with local suppliers, you can make changes seamlessly, cutting down on the risk of miscommunications and misunderstandings that can occur when working with multiple suppliers across various locations—whether because of vast time zone differences, or language or cultural barriers.
Reduced Environmental Impact
Local sourcing and shorter delivery distances mean fewer emissions, helping to lessen your environmental footprint. Not only is this good for the planet, it’s also good for business.
In fact, one-third of U.S. online adults say they spend more time thinking about the climate than they did before COVID-19. Globally, 85% of consumers say they have shifted purchase behavior to be more sustainable in the past five years.
By creating more streamlined, localized supply chains, businesses can also reduce risk. For example, rather than having one central distribution hub, having a few distribution centers spread out across the areas of highest demand can help ensure deliveries are made on time, even in times of disruption.
Sticking to a standard, one-size-fits-all approach for the supply chain can lead to rigidity—making businesses unwilling or unable to experiment, and resulting in a widespread lack of innovation.
Rather than forcing supply chain processes into a single mold across all customer segments and locations, localization allows companies to innovate based on different markets and consumer preferences. This can encourage experimentation and ideation across all areas of business, creating a more creative and open company culture.
Sourcing locally can help your bottom line, but it can also help the local economy as a whole. When you source from nearby manufacturers or work with nearby suppliers, you also support local businesses, helping to move the community forward.
Savvy consumers may also appreciate your efforts to work with local companies; highlighting these efforts in your marketing materials can help attract people looking to do business with socially responsible brands.
How to Get Started Localizing Your Supply Chain
Localizing your supply chain doesn’t have to involve a major overhaul. Beginning with a few simple steps can go a long way toward creating more streamlined and sustainable operations:
1. Work With Local Suppliers
It may not be possible to source all your parts and materials locally, but it’s probably worth doing some research on alternative options closer by. Get in touch with suppliers who offer what you need and seem to match up with your values and goals. If you can’t find suppliers in your exact location, at least look for some within your time zone, so you can meet in person as needed and communicate with ease—all while helping to support other regional businesses.
2. Tailor Inventory to Specific Segments
Use customer data to your advantage. Do customers in certain geographic areas buy certain kinds of products or sign up for certain services more often than others? Do some items sell out quickly at one of your store locations but stay on the shelves for months at your other location? Tailor your offerings and marketing messages to appeal directly to different customer segments to create a more personalized and localized experience.
3. Establish Multiple Distribution Hubs
Setting up multiple smaller distribution centers, rather than maintaining one large hub, can you help you meet customer expectations for quick delivery, create more sustainable logistics, and reduce the risk of missed delivery dates. Start by assessing where most of your customers are located to see where it would make sense to open another distribution facility, then see which products are in highest demand in each region so you can build out inventory accordingly.
4. Think Outside the Box
If you feel your business currently does not have enough time or resources to pursue supply chain localization, consider other ways you can become more involved in your community and better connected to your customers. For example, you may want to tailor product packaging and store layouts to local customer preferences, or even change your stores’ decor, music, and overall ambiance to fit the demographics in different locations.
To keep customers happy in a shifting market, supply chain management must think one step ahead—finding areas for improvement and innovation based on consumer demand, emerging trends and external disruptions. Localizing the supply chain can be a highly effective way to streamline operations while bringing down costs.
Localization can also help improve public perception of your company and increase loyalty, drawing in discerning consumers who are looking to do business with more eco-friendly, socially responsible brands.
As you continue to future-proof your business and prepare for uncertainties ahead, consider how localization may fit into your larger supply chain strategy. By bringing operations closer to home, you may also bring in massive benefits—to your brand, your customers and your community.
- “State of North American Manufacturing: 2021 Annual Report,” Thomasnet.com, 2021.
- Anjali Lai, “Empowered Consumers Call For Sustainability Transformation,” Forrester blogs, Jan. 19, 2021.
- “Global Sustainability Study 2021 | Consumers are key players for a sustainable future,” Simon-Kucher & Partners, October 2021.