Olivia Xu, Consultant at Crimson & Co, the end-to-end supply chain consultancy, comments on the current political climate and how it's time to trust local sourcing.
Following the chief executive of the Society of Motor Manufacturers and Traders, Mike Hawes', keynote calling for the government to negotiate a Brexit deal to avoid the British automotive industry collapsing, supply chain consultancy Crimson & Co states that businesses should trust local sourcing.
Olivia Xu, Consultant at Crimson & Co comments: "Localised sourcing in the UK automotive industry offers five primary benefits for procurement. It minimises risk, increases speed and agility, boosts the ability to innovate, and creates cost savings. Although it's clear that local sourcing will bring great supply chain benefits, businesses will also need to take a strategic procurement view, as well as bringing down costs to unlock the full potential of local sourcing. On the other hand, in cases where significant cost savings can be made, businesses should still consider other countries for sourcing."
Following Hawes keynote address, Olivia Xu continues, "the wider the geographic span of a supply chain, the more exposed it is to risk. Every time procurement chooses a supplier in a new geographic region or country, it increases the number of variables involved in the supply chain. Each new currency you have to procure services or products it adds another element that is vulnerable to fluctuation. Each new country your supply chain sources from expands the likelihood that geopolitical issues could affect your production – something we are seeing a lot of in the current political climate. Sourcing locally lessens the risk of this by reducing variables and allowing for a greater understanding of your home market."
Mike Hawes continues in his speech, "this uncertainty cannot be allowed to drag on – and drag British industry down with it, nor will we be satisfied with vague talk of a 'transition' or 'implementation' period." He concludes "Instead, we need a clear interim arrangement – an arrangement enabling 'business as usual' from day one."
Crimson & Co states that, along with tackling the uncertainty issues around the supply chain and the single market post-Brexit, localisation of sourcing can also bring many other benefits:
"An expansive international supply chain can also have a significant impact on the speed and agility with which an organisation can act. Having a supply chain drawn out between different countries and time zones adds another layer of complication to the process of coordinating activity. This can make it more difficult when you do have to react to risk or adverse conditions. It can also make it more challenging to be proactive about altering operations or innovating – for example, in driving new product development (NPD) or transitioning to industry 4.0. By contrast, localised sourcing allows you to be more nimble, as it's easier to ensure that everyone moves together."
Xu concludes: "Taking end-to-end cost into account is vital when developing an effective supply chain, and this goes beyond the raw cost of services and/or materials. There are many other cost considerations to working with distant suppliers - resource has to be dedicated to managing the extra complications of working across borders and coordinating the global supply chain. Sometimes, from a holistic supply chain perspective it actually works out cheaper to procure locally, even when the raw cost of goods or services looks initially to be more expensive. It's therefore vital that organisations look at procurement and the supply chain from a wider strategic perspective, rather than focusing exclusively on the tactical details."