Sourcing Strategies

In this episode of Chain Reaction Tony Hines discusses sourcing strategies and examines reasons why they are critical for securing supply chain advantage.

One of the most important considerations for any organization is where to source product and which suppliers to select. Building an effective supply base is critical to the success of most organizations. The decision to source is often divided into three geographical considerations: local, national and global. In this episode of Chain Reaction Tony Hines discusses sourcing strategies and examines reasons why they are critical for securing supply chain advantage.

Many supply managers prefer to purchase from local sources when prudent to do so. Local purchasing has a number of advantages that may include: 

• close co-operation through close proximity, e.g. enabling JiT solutions; 
 • more certain delivery dates since lead times not affected by transport delays and other risks may be reduced depending on location (e.g. natural or human disasters may be more prevalent in certain parts of the world such as earthquake zones or nearby volcanoes and wars); 
 • short lead times may eliminate inventory; 
 • faster replenishment possible from local source;
 • discrepancies and disputes may be more easily resolved; 
 • implied social responsibilities to the local community may be satisfied. 

However, local suppliers may lose out to national or global suppliers where: 
• local cost of the items is higher; 
• particular goods cannot be supplied locally to the same standard, specifi cation or price;
• markets supplied are not local and therefore it makes more sense to source closer to the market; 
• better service is possible from a non- local supplier;
• restrictions may limit the local supply source, e.g. quota restrictions.

Buying nationally May have the following advantages: 
 • national sources offer better quality and/or; 
 • faster delivery and/or; 
 • cheaper prices through economies of scale (or scope); 
 • national companies may provide better technical back- up and support services; 
 • greater production fl exibility may be achieved through national sourcing; 
 • shortage

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About Tony Hines and the Chain Reaction Podcast – All About Supply Chain Advantage
I have been researching and writing about supply chains for over 25 years. I wrote my first book on supply chain strategies in the early 2000s. The latest edition is published in 2024 available from Routledge, Amazon and all good book stores. Each week we have special episodes on particular topics relating to supply chains. We have a weekly news round up every Saturday at 12 noon…