Home » The Advantages of Domestic Sourcing and International Supply Chains

The Advantages of Domestic Sourcing and International Supply Chains

With recent events in the world today, it’s more important than ever for any wholesale business to make sure they have an uninterrupted supply chain. When a supply chain is interrupted, it creates a domino effect that lands on the customer’s door. And when that happens, the customer is not happy. Domestic sourcing and international sourcing both contribute to this idea.

To prevent losing potential business partners from every point in your wholesale supply chain, you should diversify it. In this way, if one strand of your web gets interrupted, another picks up the slack. Alternatively, you can condense the wholesale supply chain. Move your business closer to home, so that it’s shorter and you have more control of it. Both are valid options.

Which Strategy Is the Best for You?

Whichever strategy you pick for your wholesale supply chain will probably come down to the availability of your vendors domestically and internationally. These choices each have their own advantages and disadvantages. What follows is an in-depth explanation of the capabilities and the dangers of both supply chain models.

Both options have their merits and flaws. An international wholesale supply chain is usually cheaper, but it can have a longer lead time. It also requires a sensitive and extended logistics network to deliver the product. These supply chains can experience disruption from local politics, taxes and tariffs. Political turmoil or health scares also affect the workers’ lives.

Domestic supply chains can be more expensive and may not be able to produce a high volume of products, but the increased cost buys security. Domestic supply chains are immune to international problems like sickness, politics, and tariffs. The supply chain moves faster when it’s close to home and has fewer interruptions.

The Pros and Cons of International Supply Chains

International sourcing is a strategy that involves moving the wholesale supply chain to countries where the raw materials or work will be cheaper. This typically involves countries like the US, UK, and Western Europe sending their work to places like Mexico, China, Eastern Europe, South America, and SouthEast Asia.

The plan is to minimize costs and maximize profits, and mostly benefits simple products that don’t have complex parts or important purposes. Cheap garments like t-shirts or small injection molded toys or hand tools are ideal candidates for this strategy. Sophisticated computer parts and sensitive instruments that operate in precise environments where failure can be catastrophic are not good candidates, unless the manufacturer has specialized tools and a highly trained labor force.

Activating a Superior Labor Force

Some vendors in some countries have developed specialties in certain areas. They’ve been working in an industry for a long time and know how their machines work and how best to train their labor force. A factory that has been making car parts for years will probably know what they’re doing and be able to re-tool and resume production on a similar car part with minimal downtime. Utilizing this industry veteran may add more value and quality to your product because you’re dealing with specialized experience.

Bigger can be Better

An international source may have much larger production capability than a domestic source and be able to crank out more units faster. This is a safer choice for products that are simple and high volume, but is less beneficial for more sophisticated parts or luxury goods that have value based on quality or scarcity. It’s important when looking for a source to know where your product stands on the value scale and the complexity scale, and if being able to make such a high volume of it quickly is really a benefit. If it is, an international supplier is a good choice.

Technological Advantage

An international source might have better tooling or more complex machinery that a domestic source lacks. If the domestic supplier hasn’t made the investment in hardware to meet your manufacturing needs, you may be forced to find an international source whether you want to or not.

Taxes and Trade Deals

When you source internationally, you put your products at the whims and moods of politicians who may not have a grasp on your trade relationship and your needs. They don’t know what kind of damage they could be doing to your business, or even worse, they might be doing it on purpose to get some kind of leverage on the other country. This can create a volatile rollercoaster environment that can have an overnight or instant effect on your wholesale product. Since most international sources are chosen because of a benefit to margin or profit, suddenly shifting that margin overnight can move a product from the black to the red. When you source internationally with volatile politicians, this is the nightmare you live with.

Political Instability

Many times when you source internationally for a profit maximizing strategy and cheap labor, you get what you pay for. The home country of your factory might be undergoing radical political shifts or regime changes, and power could be changing hands violently and disrupting business. Countries where labor might be cheaper can also have other problematic issues with their populations. A chain of banana republic dictators or military strongmen can cause turmoil that will lead to lost productivity, or even worse damage property and permanently reduce the factory’s production capacity. You never know what’s going on over there until the smoke clears.

Shipping Overseas

Sourcing the product overseas takes time. As raw materials and finished goods need to be packed up and sent all over the world. This incurs a cost of its own. It also creates a fragile ecosystem of logistics that can be damaged by the tariffs or political instability mentioned above. When you source internationally your product is not only subject to the taxes and politics. But every cargo plane, container ship, airport, and hurricane between you and your product is as well.

Start Up

Lead times between product runs are also longer with international sources. Your factory has to re-tool for your product line, and that might mean sourcing hardware internationally as well. Whatever you fly in and out, you have to fly in and out, and when that happens, all of the problems mentioned above follow it. A vendor closer to home might not have this problem.

Knowing Your Supply Chain

When your factory is out of sight, it can be out of mind as well, and that might not help you sleep at night. With your international source, you might not have a person on the ground at your factory that manages quality control or vendor relationships that represents your interests or speaks your language. Once you push the button and turn the machines on, you really don’t know what you’re getting until it’s shipped back to you and you have it in front of you. You have to trust your source, and they might not be trustworthy. Many products have disastrous ends that start with lead paint, substandard materials, or an unfulfilled promise by the vendor that the business ends up paying for, all because no one on your team was there to make sure the right process was being respected.

The Pros and Cons of the Domestic Supply Chain

Domestic sourcing might not be as cheap as international sourcing, but it does not have the same logistical requirements that international sourcing requires. It also has other intangible benefits related to the consumer that buys the product at the end of the chain. These benefits can be very valuable when leveraged correctly by the distributors and retailers. Specifically, it gives your product an advantage in the market.

Short Lead Times

When your source is in your backyard, you can just take a walk down the block and visit your neighbor. A domestic source means that your lead times will be short. Any re-tooling or machining necessary for your product line will be swiftly delivered. And you’ll know about it every step of the way. Not having to deliver the tooling overseas and setting it up can be a lifesaver.

Consumer Confidence Leverage

When your product is produced domestically, it builds consumer confidence. This is especially important if you’re in food and beverage, where the consumer is very concerned with the source. Some consumers and retailers pride themselves on buying domestic products and supporting local businesses, and this is a quality that can be leveraged for gain. You can gain these customers that prefer to patronize local businesses and buy domestic products.

Local Supply Chain

A domestic source might have a local supply chain that is immune to some of the problems that come with an international supply chain. Domestic sources are able to address issues like shortages immediately. They can even be in the same timezone as their supply chain. Domestic sources can communicate directly when the supply chain has problems. When you source domestic, you can be right on top of your supply chain issues. Instead of waiting for overseas flights or cargo ships.

Local Scarcity

A local source might not have the raw materials or available supplies of an international source, limiting their production capacity. This is a problem for high volume products. But not so much of an issue for low volume products that are more sophisticated or are priced with scarcity in mind. If your brand is positioned as a high value product, scarcity is not necessarily a disadvantage.

Local Law

A domestic source may be a weaker choice due to local environmental or labor laws that restrict the output or increase the cost of the product. It can also make products more difficult or expensive to produce. This is a double-edged sword however. Because these laws are typically in place to prevent the kind of dangers that threaten the productivity and health of laborers in cheaper international sources. A domestic source in a western democracy will be more expensive. But will also be more stable than a source in a country that is dealing with sickness or political turmoil.

Find Your Source with SeeBiz

No matter if you choose a domestic or an international supply chain for your product. SeeBiz is the business to business network that will help you locate and communicate with your new partners. As a result, it allows you to contact them instantly with up to date contact information and communication tools.

The Business Network for Wholesale

SeeBiz.com works like facebook, except that instead of personal accounts, it’s strictly for business. Log onto SeeBiz to get in touch with manufacturers, wholesalers, retailers, and meet your new business partners today. It’s like a trade show in your computer.

Communicate Instantly 

SeeBiz.com uses familiar social media interface communication tools that everyone understands, and sends your clients directly to your inbox. SeeBiz can be set up to send all your traffic directly to the sales channels and communication channels you already use and prefer. So there’s no need to re-learn new software or reinvent the wheel.

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With your catalog on the SeeBiz.com platform, your google ranks will be boosted. Searches list your products higher on the results. More customers will be driven to your catalog. And your products will be closer to the top of the page in a google search. This makes it easier for customers and retailers to find you and your products.

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Log onto SeeBiz Today and Meet Your New Domestic or International Wholesale Business Partners.

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