Supply Chain Localization emerges as an undervalued yet firm approach to propel enterprises
For improving ROI and expanding the business footprint, the basic thought process revolves around reducing manufacturing costs and enhancing production efficiency, which is insufficient in current circumstances. Businesses need to reconsider their logistics segment in this era of uncertainty, where the U.S.-China trade war, COVID-19 pandemic, and Russia-Ukraine war have partially and, in some cases, completely devastated the existing global supply chains. In addition, a brand’s reputation is at stake if a delay is observed in the supply of raw materials and final products usually, which is an indicator of an inefficient supply chain. Rather than depending upon sole manufacturers & suppliers established overseas, an enterprise should eye upon more diversified or local supply chain solutions to tackle global supply chain disruption. Indeed, reshoring or bringing operations and manufacturing back to their respective native countries help businesses enhance their supply chain connectivity. Besides reinforcing, other compelling reasons behind localizing the supply chain are elucidated below: –
Cost-Cutting:
Logistics is cost-intensive, especially for a globally operating business. In 2021, the US business logistics costs (USBLC) touched $1.85 trillion. Hence, ineffective supply chain management can further augment the financial burden on businesses. By localizing the supply chain, companies won’t need to source products from foreign suppliers, which will help save a hefty amount of money being expended on shipping and tariffs.
Boost Production:
To sustain in this era where consumer trends shift rapidly, businesses need to escalate their production to serve customers better and meet the fluctuating market demands in a limited period. Supply chain localization saves a significant amount of wait time, which is otherwise exhausted in shipping raw materials, semi-furnished, and final products. Moreover, the Suez Canal Crisis-like potential events also obstruct the supply of raw materials. Therefore, the impact of all these factors can be curtailed by adopting supply chain localization. Also, by opting for localized suppliers, businesses can receive additional raw materials in less or no time in case of a surge in demand.
Geopolitical Affairs:
In the past few years, trade wars & invasions have influenced the geopolitical environment with stringent restrictions on trading essential as well as non-essential commodities. In addition, abundant offshoring incidents, including supplier viability, have been witnessed during COVID-19, urging businesses to prefer localization. Lastly, administrations offer alluring endowments to encourage native industries to reshore their business operations. To validate, Japanese regulators are providing subsidies worth $2.2 billion to help manufacturers shift their production units from China & other Asian countries to Japan.
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