9 Key Benefits of Localizing Your Supply Chain Within the USA

The pendulum is beginning to swing back toward a localized supply chain as more manufacturers and suppliers aim for stability and future-proofing their businesses.

There’s no doubt that moving forward, companies will have to prioritize creating a resilient supply chain—and localization is one of the ways to achieve that. 

But what is the current state of the U.S. supply chain, and how can localization help ecommerce businesses achieve their goals? In this article, we explore the benefits of a localized supply chain for American manufacturers and suppliers. 

U.S. supply chain outlook  

Businesses worldwide favored globalization of the supply chain to tap lower labor costs and other competitive advantages. However, different factors, including geopolitical risks, pandemic disruptions, social unrest, and sustainability concerns, have put a higher value on supply chain resilience and reopened the question of localized supply chains. 

After the supply chain disruptions during the pandemic, when we witnessed clogged ports and soaring shipping costs, businesses started reevaluating their supply chain strategy. The supply chain crisis had a domino effect across the global economy. The Federal Reserve Bank of New York estimates that 40% of inflation between 2019 and 2021 was caused by supply shocks.

As a result, American manufacturers and suppliers started reshoring. Research from SAP shows that 60% of businesses prioritized U.S.-based supply chain solutions to overcome supply chain disruptions, and it isn't just small businesses, as larger businesses look to reshore too.

Managing supply chain disruptions is still a top priority for manufacturing in 2024. According to APQC (American Productivity & Quality Center), 51% of organizations selected managing supply chain disruptions as a top focus area in manufacturing. 

According to the same survey, 84% of the respondents across industries indicated that their organizations have re-evaluated or modified their supply chain strategy to tackle the obstacles.

With all these numbers in perspective, the question is: how can businesses benefit from a localized supply chain? It’s time to find out. 

Benefits of local supply chain 

A local supply chain is a network of manufacturers, suppliers, and distributors of goods and services close to the point of consumption with the ultimate goal to streamline operations and create a resilient supply chain. 

But why should American manufacturers and suppliers prioritize a closer-to-customers supply chain strategy? Here are some of the benefits of a local supply chain: 

1. Mitigating supply chain risks

Disruptions such as geopolitical tensions, climate change, labor shortages and unrest, and worldwide cyberattacks have posed challenges for manufacturing and the supply chain.

The new business landscape made companies reconsider whether they could benefit from supply chain reshoring, bringing production to a home country or point of customer demand.

While a global supply chain opens up great business opportunities and enables you to source materials, products, and services from countries with lower labor rates, it also makes you more vulnerable and exposed to greater disruption risks out of your control. 

While you can’t control everything, with a localized supply chain, you can mitigate the risk of external disruptions caused by factors such as international trade disputes, geopolitical tensions, or natural disasters.

2. Reducing lead times 

Lead times play a crucial role in business. While there’s a common misconception that businesses are struggling with lead times during the last-mile phase, the truth is that problems with lead times start to occur even at the starting point in the manufacturing process. The result is a negative customer experience. 

So whether you want to speed up “time to market,” product development, or material procurement—a local supply chain can help you stay ahead of the competition. Sourcing inventory locally usually means shorter supply chains and, as a result, faster delivery times.

Staying on top of your inventory levels will require tracking inventory changes across stores and locations using a software like Veeqo, but here’s the good thing—when you work with local suppliers, you can react promptly to fluctuations in demand and minimize stockouts or overstock situations.

3. Saving costs

Whenever businesses consider the pros and cons of a global vs. local supply chain, cost savings usually end up on the list of advantages for a global supply chain. Unfortunately, that’s not always the case.

Whenever there’s a significant global disruption, shipping costs soar. We witnessed that during the pandemic. As reported by The Economist, the cost of shipping a 40-foot container from China to America’s West Coast reached its peak of $20,600 in September 2021.

Sourcing locally improves visibility and eliminates some of the costs and risks related to global sourcing, including reduced shipping expenses, lower inventory carrying costs, and minimized risk of currency fluctuations. 

Further reading: Everything You Need to Know About Third-Party Logistics (3PL)

4. Enhancing quality control

One of the biggest hurdles of the global supply chain is maintaining oversight and control over the sourcing process. Working with international suppliers across various locations adds to the complexity of supply chain management. 

Quality control is essential for manufacturers and suppliers trying to keep high standards. Here’s where a localized supply chain can make a difference. The ability to meet in person with local suppliers and have clear communication about quality standards can become a significant competitive advantage. Setting up clear expectations upfront can minimize the risk of misunderstanding in the future.

5. Reducing carbon footprint

Companies are under constant pressure from consumers, inventors, regulators, and other stakeholders to scrutinize the environmental effects of their businesses. One of the biggest topics is supply chain management since it has a massive impact on sustainability. 

Data from the World Economic Forum shows that eight supply chains account for more than 50% of global emissions. Food, construction, fashion, fast-moving consumer goods, electronics, automotive, professional services, and freight account for more than half of all global greenhouse gas emissions.

According to APQC, sustainability will have a major impact on the supply chain over the next three years (by 2027). Data shows that 89% of organizations agree that sustainability will have a significant effect on supply chains. 

By sourcing locally, American manufacturers and suppliers can decrease carbon emissions through lower transport and travel.

6. Fostering greater collaboration

Another benefit of a localized supply chain is working closely with local suppliers, which can foster better relationships and, as a result, a better quality of service. 

Working with global suppliers can create serious challenges—from time zone differences to language and cultural barriers. On the other hand, working with suppliers in close geographic proximity opens up the possibility for an in-person meeting, which can be an excellent foundation for a solid collaboration.

7. Aligning with the local market

Customers in different markets have unique cultural differences. That’s why keeping a pulse on the local market is essential in understanding customers. On the flip side, failing to do so can result in a lack of connection with local customers and even negatively affect your company's reputation.

Localizing the supply chain can help you produce or source products tailored to local tastes, preferences, and regulatory requirements and better cater to customers’ needs.

8. Supporting the local economy 

When a business sources inventory locally, it also supports other local businesses and communities. This, in turn, creates synergy and chain effect, helping the local economy grow and develop further. 

And while we live in a rapidly globalizing world, customers still appreciate companies that support the local community through their business efforts. To capitalize on their decisions, businesses also highlight their localized supply chain strategy in their marketing materials to capture the attention of customers looking to support local businesses.

That doesn’t mean that you shouldn’t expand internationally—it just means that you need to find a way to support your local community, and a localized supply chain can be a great way to achieve that, no matter which country you're selling to.

As an example, British homeware brand, Avalon Home, manufacturer all their own products in their factory in the Lake District, and have found they've had a huge boost in sales from American customers who are willing to pay a higher price in order to purchase products made a little closer to home. While they focus on smaller runs of products, the higher prices they're able to charge for quality products makes up for the reduction in sales.

Read more: Avalon Home Discuss Why They Localized Their Supply Chain

9. Improving supply chain resilience 

After the global turmoil and supply chain woes, businesses realized that instead of focusing on globalization or cost savings, they needed to put an emphasis on resilience. Working with local suppliers can help you respond faster to changes, making your business more flexible and agile.

Local suppliers are often more responsive to market changes compared to global ones. They can quickly adjust production schedules, accommodate custom orders, or adapt to shifts in demand. 

Unlocking business resilience through localized supply chain  

Supply chain issues have come to occupy a constant place in the headlines over the past years. The economic headwinds and global challenges that happened in a span of a few years have put a renowned focus on localized supply chains. Moreover, businesses are facing challenges with the new sustainability requirements. 

And while you can’t control the turmoil in the world, you can diversify your supply chain with local suppliers to make it more resilient and agile. Having multiple sources of supply is essential for minimizing potential supply chain disruptions.

The supply chain is the backbone of every successful business. Having a resilient supply chain supported by advanced automated inventory and warehouse software with powerful analytics and forecasting can future-proof your business. 

Ready to grasp the benefits? Sign up to Veeqo for free and get a high quality shipping and inventory software, that integrates with multiple marketplaces and carriers.