Before taking a purchasing decision, a strategic buyer needs to keep in mind the big picture: think global, evaluate all the costs (Total Cost of Ownership) and also consider the impact of their decision on the strategy of the company and the local market.
While one can make interesting savings through the sourcing of a supplier in a low-cost country, they could be lost in not taking into account all the local parameters. For example, a company may have certain agreements with the local government where it is based. These agreements could be of various kinds. It could be that the government is a major customer or has a tax agreement. In this case, the government may expect the company to play a local social role, like using small-sized and/or local companies as vendors. Furthermore, some strategic local customers may have the ability to be suppliers, and it would be a good idea to consider them for market testing.
The procurement of products from distant locations is certainly valuable for a big volume of standard products. However, if a company needs a product to be developed between the Research & Development department and a vendor, it must think about the importance of having a local partner. In doing so, it could have many advantages: no time difference, less need for warehousing, increased delivery time, same language and less cultural differences, meeting easily if needed. All these benefits reduce the risk of misunderstandings and delay. They also increase the probability of success and are environmentally friendly.
Yes, with sustainable sourcing, companies can be also environmental actors. In Switzerland, small local companies, because of their size, are dealing with a very limited amount of customers. Yet they differentiate themselves from their big competitors in delivering a personalized and high-quality service. On the other hand, buyers also need to make sure that the “small” local vendors meet the critical size to have enough personnel, are willing to improve their processes and have enough financial capital to be able to satisfy all of a company’s needs.
In a nutshell: think globally about what you need to purchase – but consider the advantages of buying local.
photo credit: SBPR via photopin cc
