Near-Sourcing is a term used to describe a business placing some of its operations close to where its end-products are going to be sold. This is the direct opposite of outsourcing, which has been the leading trend for manufacturers in the past few decades, where operations are moved to developing nations with lower costs.
We have seen in recent years how consumer demands are reaching new highs for businesses- particularly during the pandemic period-. Manufacturers have to take a closer exploration of their options when it comes to third-party vendor risks and supply chain.
Not so long ago, outsourcing was the more efficient choice due to lower labour costs and resource general costs in developing countries. But the rising in shipping, customs, labour, and other resources in those countries has made many companies rethink their operations and finally decide to turn to near-sourcing. On the other hand, former prices may no longer buy the same level of quality in outsourced products.
When this is the case, the better choice for many companies is to bring their operations to closer locations, this doesn’t always mean moving back to the same country, currently, some popular choices for North American countries include Mexico and some south American countries and turning to near sourcing may present some benefits.
- Good for the community
Naturally, if local sourcing increases your profitability, so do other suppliers and manufacturers in your area, which can be a great benefit to the local economy and the people who live there.
Additionally, respected and wealthy companies can contribute to communities through fundraising, volunteering, benefits and sponsored activities. Industrial sourcing activity continues to grow. Consumers are increasingly demanding that companies increase their transparency on ethical supply chain and corporate social responsibility, making manufacturers take a closer look into their overseas operations.
- Shorter Supply Chain
When manufacturers and suppliers are located either locally or regionally, the transit time is significantly reduced. With near sourcing, the supply chain is able to position itself more strategically in today’s competitive marketplace. Companies can now organize smaller deliveries to accommodate changing needs and increase speed to market. Today’s shipping model requires faster delivery of products and demands a quick response to customer needs. By shortening the supply chain, companies can be more responsive to customer needs and concerns. In a global supply chain, unpredictable problems can come up easily and companies need to prepare their stocks. This increases the cost of manufacturing and warehousing. With near sourcing, companies can manage their finances and be more autonomous.
- Better Control
With proximity subcontracting, companies can visit locations more frequently, with fewer travel costs and more convenience. There is less risk of mistranslation, as the company and the supply chain actors are more likely to have common cultures, languages, references, etc. In addition, companies can better respond to rapidly changing customer demands and schedules by using local partners.
Near sourcing has become more attractive to many high-tech companies in the wake of the Covid-19 pandemic. It’s not completely beneficial for everyone; many companies are still on good terms by continuing to outsource their manufacturing to further locations for a variety of reasons. Despite all the benefits, don’t adopt a near sourcing strategy without a detailed analysis of your supply chain. Carefully analyse the total costs associated with near sourcing versus outsourcing, the potential risk factors, and your competitors, customers and supply chain participants.