Unlocking the Advantages of Local Sourcing for Manufacturing Success

3 May, 2024

Originally published in Industry Update Manufacturing Magazine for Marsh Alliance

In the intricate dance of global supply chains, the COVID-19 pandemic cast a glaring spotlight on the vulnerabilities of overseas sourcing, prompting a re-evaluation of traditional practices. In recent decades, Australian businesses have been drawn to offshore suppliers, enticed by lower costs and perceived efficiencies. However, the pandemic, plus other ongoing geopolitical tensions in Europe and the Middle East, have laid bare the risks associated with this approach.

There is a growing awareness of the untapped benefits of prioritising local Australian suppliers for critical components. According to a 2023 report by the Capgemini Research Institute, 71% of surveyed Australian businesses stated they were actively investing in regionalising and localising their supplier base to help insulate them against global risks. The report also found that by 2025, procurement from offshore suppliers is expected to drop by 7%.

Australian manufacturers can be competitive preferred suppliers against overseas counterparts, but is a like for like part price comparison fair? These simplistic comparisons significantly diminish the added value Aussie-base producers represent to you, and in turn, your customers.

Consider the following benefits gained from purchasing within Australia:

Greater shelter from adverse global economic events and foreign exchange movements:
Australian manufacturers offer a shield against global economic uncertainties and foreign exchange fluctuations. Offshore supply chains are prone to disruptions caused by wars, natural disasters, and regional conflicts, often leading to unexpected shortages. Major disruptions to logistics, like the 2021 Suez Canal obstruction, are often more easily managed when businesses source their products and components from Australian suppliers. During the global COVID-19 pandemic, disruptions in international supply chains were widespread. Australian manufacturers, however, experienced fewer interruptions, showcasing the resilience of a localised supply chain. Additionally, currency fluctuations that occurred during this time had a lesser impact on businesses sourcing locally.

Greater certainty of quality raw inputs and ethical sourcing:
Committing to sourcing raw materials locally ensures a consistent level of quality and adherence to ethical standards. Australian producers are bound by internationally leading employment and industrial relations laws, reducing the risk of unethical practices and modern slavery. This commitment to ethical sourcing enhances the reputation of businesses and ensures that products meet the highest quality standards.

Reducing lead times for your customers:
Localising the supply chain in Australia significantly reduces lead times. This allows businesses to streamline their operations by minimising inventory stock holding and warehouse overheads. Quicker lead times contribute to efficient working capital management, helping to reduce costs associated with inventory and stock management.

Greater responsiveness and support to product design challenges:
Local suppliers in Australia offer invaluable support in navigating product design changes and improvements. Leveraging local technical expertise expedites the development process, ensuring a competitive speed to market. This advantage is particularly crucial compared to offshore suppliers who may face challenges in effective communication and collaboration due to an over-reliance on virtual meetings. Communicating with local suppliers in Australia also reduces language barriers and the challenges of significant time zone differences.

Dealing with a supplier well-versed in the Australian market:
Long-standing local suppliers in Australia possess extensive knowledge of the domestic market. This ensures that clients are not treated as minor customers and enables businesses to avoid competition for factory space with larger multinationals relying on offshore channels. The familiarity with local market dynamics also facilitates better alignment of products with consumer preferences and regulatory requirements.

Quicker engagement with transportation and supply chain intermediaries:
Local suppliers in Australia have established strong relationships with domestic transport companies, providing businesses with flexible speed-to-market options. This proves invaluable in situations where unforeseen delays may arise, offering a distinct advantage over foreign manufacturers. The close proximity also allows for more efficient communication and coordination, reducing the likelihood of transportation-related disruptions.

In conclusion, the feat of achieving cost efficiencies coupled with a resilient supply chain will always be an ongoing balancing act for businesses. The upfront cost advantages of offshoring can often go unrealised in the face of poor responsiveness, long lead times and inferior quality materials. There’s no shortage of Australian based manufacturers who are ready and willing to cater to those looking to adopt local sourcing and production.

Secure your supply chain with Marsh Alliance

Marsh has been Australia’s leading producer of springs and metal components for over 70 years. We produce from bespoke limited run orders through to high-volume contract manufacturing. Over 90% of our factory volume is produced from Australian made raw inputs too and we strive to maintain product lead times within a few weeks of order (for goods made from locally sourced and stocked materials). Our inhouse Quality Assurance and R&D departments work to support our clients’ technical and product development needs. Visit marshalliance.com.au to learn more about adding us as a local supply partner.

Source: Capgemini Research Institute, “Illuminating the path: Building resilient and efficient supply chains in the consumer products and retail industry,” 2023.