Localization of International Procurement: Points to keep in mind when promoting local procurement by procurement and purchasing departments in the manufacturing industry

When large manufacturers operate across different countries and regions, their procurement and purchasing departments face the challenge of balancing global optimization of costs with supporting local economies and communities. While sourcing materials and services from a global supply chain allows leveraging economies of scale, an overly centralized approach can undermine local job creation and economic growth in the regions where a company has major operations. As responsible corporate citizens, manufacturers must consider how their procurement practices impact local stakeholders.

There are several important points manufacturing companies should keep in mind to thoughtfully promote and increase local procurement:

Evaluate Total Costs and Benefits
While direct material and production costs may be lower through global sourcing, manufacturers must perform a comprehensive total cost analysis that considers indirect impacts. Procuring from local suppliers reduces transportation and logistical expenses. It also supports workforce stability by preserving local jobs and livelihoods. Strong local economies benefit companies through a readily available talent pool, lower employee turnover, and a dedicated customer base for their products.

Develop Local Supply Networks
No region has all the required capabilities and capacities within its borders. Companies can work with local economic development agencies and industry associations to identify emerging suppliers and potential partnerships. Investing in supplier development programs helps grow local networks over time. Regular communication and talent/skill-sharing facilitates developing competitively priced local alternatives that comply with quality and compliance needs.

Tailor Procurement Strategies by Location
Rather than a one-size-fits-all approach, procurement strategies must recognize regional differences. Certain materials may only be feasibly sourced locally at some plant locations due to transportation costs or regulatory compliance factors. Prioritizing local sourcing makes the most sense for indirect spend categories like facilities management, logistics, and professional services. Local purchasing decisions uphold community commitments highlighted in sustainability reports and public statements.

Support Diversity in Supply Base
Promoting local procurement expands economic opportunities for small and medium businesses including those owned by women and minorities. Targeting a portion of appropriate spend towards diverse local suppliers encourages an inclusive supply chain. Collaborating with local partners helps identify such suppliers through outreach, matchmaking, and capacity building. Diversifying the supply base strengthens resilience against geopolitical or economic disruptions.

Foster Long-Term Partnerships
Establishing long-term contracts and partnerships with reliable local suppliers creates confidence for investment and innovation. Joint projects advance technology adoption and develop new capabilities. Strategic collaborations help retain manufacturing activities and jobs within communities. Local events and roundtables facilitate two-way communication to understand priorities, address challenges, and leverage each other’s strengths over the long-run.

Audit and Analyze Impact
Regular audits ensure local sourcing strategies quantifiably increase procurement from eligible regional suppliers. Tracking metrics like jobs supported, carbon savings, and supplier development success stories enables demonstrating benefits to various stakeholders. Analyzing qualitative impacts through surveys and interviews provides a well-rounded perspective captured in sustainability reports. Ongoing reviews identify areas for improvement and opportunities to foster greater localization of the supply chain.

By adopting a strategic and collaborative approach, manufacturing procurement and purchasing teams can amplify the positive economic and social impact of their organizations in the communities where they have major operations. Thoughtful localization policies create opportunities for all while also strengthening long-term business resiliency for the challenges ahead.