The End of Global Sourcing as We Know It? The MIT/Sloan View (Part 3)

Please click here and here for the first posts in this series.

Improving end customer intimacy, service and support is another key benefit of localizing supply chains. As the authors of an article in MIT Sloan Management Review suggest, "it is increasingly clear that the physical location of supply and manufacturing facilities has a significant impact on close-to-the-customer issues such as providing custom products, responding effectively to customer requests and ensuring reliable delivery in spite of demand swings." Localization can be a boon, for example, to reducing the time to identify decreasing quality levels (e.g., PPM, escapes).

Whereas there may be additional containers of defective materials, parts, components or finished products on the water by the time a quality issue is spotted in a global sourcing situation, in the case of regional sources of supply, issues can be spotted much quicker. The same holds true in addressing corrective action requests and monitoring responses and compliance among suppliers with specific issues. And as we all know, despite Thomas Friedman's pronunciation that The World is Flat: it's really not. Cultural issues and hurdles can often get in the way of addressing quality concerns at the source as quickly as possible when cross-cultural encounters occur.

This is one of the many reasons that regional sourcing (we believe, and clearly our experts writing in MIT's lauded journal believe) that global sourcing is changing. This change marks an evolution away from the arbitrage opportunities (based on labor, materials, etc.) that earlier global sourcing programs capitalized on. Regardless of the price of oil, we believe that regional sourcing will be the dominant form of global sourcing in many supply chains going forward. Buy locally, sell locally seems so simple. But it's finally time we arrived at such a sourcing mission statement.

Jason Busch

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