Localizing supply regions during economic instability

November 7, 2022

The unfortunate reality is that we live in very economically uncertain times. The economy is currently incredibly unstable and unpredictable, and this instability will inevitably continue to affect consumer buying behavior. The rapid evolution of the economic landscape will have particularly significant consequences for the logistics and warehousing industry, which is necessarily shaped by purchasing patterns.

During economic peaks, consumers buy more, resulting in greater order volumes. During dips and valleys, people purchase fewer non-essential goods and when finances are especially tough, struggle to purchase even essential items. This fluctuating demand affects every stage of the supply chain, so organizations across the manufacturing and distribution sectors need to respond accordingly.

As The Innovation Garage explains, localizing your supply region is a great way to overcome these challenges and ensure you remain afloat even when the economy is volatile. Here's how to go about it:

What are the material benefits of supply region localization?

Even though operations have largely returned to normal, there are still delays and labor shortages. To combat the detrimental effects these obstacles could have, businesses should consider using local partners. This means reducing overseas outsourcing where possible, thereby localizing supply regions.

In doing so, waiting timeframes when ordering stock are reduced and import fees are cut down. This latter consideration isn't one to be taken lightly, given the importance of reducing overhead expenses during economic insecurity. Further, it's easier to adhere to governmental regulations when you partner with local organizations. It's important because this helps prevent fines and penalties associated with non-compliance.

Additionally, and most obviously, you'll reduce delivery and distribution times. It's a lot quicker to have an order trucked a couple of hundred miles across the state or country than it is to have cargo ships or planes travel thousands of miles from other continents. This will necessarily lead to reduced turnaround periods, which is crucial for satisfying the ever-increasing demands of today's consumers.

How do you localize your supply region?

All that said, localizing your supply chain region is often easier said than done. To do this in the easiest and most efficient way, follow some general guidelines and best practices. These include:

  • Finding reliable potential partners in your operational locale. This will take a hefty amount of due diligence on your part but is necessary to avoid any nasty shocks or surprises.
  • Re-calculating your operational costs. Local companies and businesses often charge more for their goods and services, so you'll need to factor in increased expenses, but these will even out over time.
  • Revisiting and reviewing your business strategies. Moving over to local partners may have an impact on your goals and processes. It's critical that you establish whether you need to change any of your programs or policies accordingly.

When you don't know how consistent your demand will be, switching to a localized supply region will be invaluable.