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Supply Chain Issues? How Going Local Can Help

supply-chain-issues?-how-going-local-can-help

The pandemic has been a double whammy for entrepreneurs. On top of the personal stress of enduring the virus, they’re dealing with constant delays and shortages impacting every part of their business, frustrating customers and owners alike.

Global supply chain disruptions have become common amid the pandemic, with shortages, rising import costs, and delays interrupting the normal flow of goods. The impact has been felt by the world’s biggest companies and small businesses trying to secure the materials they need in a timely manner.

According to our Future of Commerce report—a commissioned study conducted by Forrester Consulting on behalf of Shopify—shipping delays, shipping costs, and manufacturing delays are the top supply chain concerns brands expect to encounter in the next 12 months.

Brands also know this is a problem worth solving in 2022. According to the report, brands are planning to invest in these areas this year:

  • 45% plan to invest in increasing manufacturing capacity
  • 44% plan to invest in increasing the speed of their supply chain
  • 44% plan to invest in improving collaboration with supply chain partners
  • 30% plan to invest in decreasing associated supply chain costs

Another method to lessen global supply chain disruption is to make your supply chain less global. It’s a solution that’s certainly not one-size-fits-all and comes with its own challenges, but it is one way to add stability to your supply chain. We’ll go over why businesses are localizing their supply chain and how you can take steps to do the same.

Bring your supply chain closer to home

The concept of making your supply chain local or even just domestic isn’t new at all. There’s always been a market and an associated ethos of buying products made in your own country. In a globalized economy with so many products made with cheaper labor overseas, it’s increasingly rare to find goods made domestically, especially in the US and Canada, giving the ones that are a certain prestige.

However, amid the supply chain disruptions of the pandemic there’s renewed interest in bringing the process closer to home. This is known as “reshoring” or “onshoring.” There’s also the concept of “localization,” which means bringing points in the supply chain closer, such as localized distribution centers.

Each part of the supply chain you can bring closer to home is an opportunity to lessen disruptions.

According to The New York Times, some corporate giants such as tech companies and car manufacturers have accelerated efforts to bring at least some of their manufacturing capabilities back to the United States. And that’s especially true for those with manufacturing in China, where a trade war with the US and rising shipping costs have had brands rethinking where to produce their goods.

“It’s a big endeavor, but it’s the future,” a Toyota executive told the Times.

This process can look like a lot of things—from moving just part of the process to a brand’s home country, or investing in upgrading existing facilities. According to Deloitte, 75% of brands surveyed in 2020 were planning some sort of reshoring efforts.

Small or medium businesses may have less complex supply chains than these big brands, but reshoring is still a challenge. Domestic production is generally more expensive and it might be hard to even know where to start. But each part of the supply chain you can bring closer to home is an opportunity to lessen disruptions. 

The benefits also go beyond lessening supply chain disruption. The Reshoring Institute—an organization that advocates for bringing manufacturing back to the US—found in a survey that nearly 70% of respondents preferred Made in America products, and 50% were willing to pay 10% more for products made domestically.

How Franc built a made-in-Canada company

Brandy Mercredi started her clothing brand, Franc, in 2017 and knew she wanted to build her company in a different way. She’d been working in the apparel industry for years and was frustrated with wasteful and exploitative practices that she’d seen from other brands.

“I just ultimately decided that the best way to fix it is just to create a brand that doesn’t do those things,” she says.

She founded Franc as a line of sustainable, ethically made wardrobe staples, and she built her supply chain with that philosophy front of mind. All the pieces are knit, dyed, cut, and sewn in facilities just outside of Toronto, where Brandy can regularly visit and ensure good working conditions.

For her raw materials, Brandy gets TENCEL from Austria, cotton from the US, and certified organic cotton from Turkey. The fiber is also spun in Turkey, as there is no capacity for that work in Canada. That in itself demonstrates the challenges of trying to go local—some materials or processes simply aren’t available domestically.

Building her business to have a transparent and partially localized supply chain has protected Brandy from issues that other companies have experienced, but that’s not to say there haven’t been bottlenecks. At the beginning of the pandemic, when people were snatching up sweatpants, she had trouble meeting demand with her supplies. She was also told to anticipate delays from her knitter in Turkey. But, because other aspects of the process are easier to control, it’s also easier to problem solve when just one part of the process is delayed.

“There’s always something. Like one thing comes a little bit late, or there’s a little bit of a delay somewhere, then it delays everything. But for the most part, I can reach out and go visit them and talk to them about it,” says Brandy. “Then I can make a plan, rather than just waiting.”

She’s been able to solve problems by simply driving over to a facility, rather than having to wait months for an issue to resolve and pieces to ship. She’s also been able to build personal relationships with her supply chain, thinking of them more as partners in the process and making it easier to problem solve when issues arise.


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Steps you can take to localize your supply chain

Moving your supply chain to be closer to you isn’t an easy process and likely not one that can be done all at once. You’ll need to figure out what’s actually possible, what if anything can be moved, and also how to communicate those changes to your customers.

Do your research

It’s a nice idea to move your whole supply chain to be domestic, but it may not be realistic. As manufacturing and raw material sourcing moved overseas, facilities in your home country may have shut down. 

In Brandy’s case, she’s using one of the last dying facilities in Canada, and she was unable to find yarn spinning near home. Your business may have its own challenges. Microchips, for example, have faced major supply chain shortages because the largest chip makers are in China. Clothing manufacturing has also moved largely to Asia. You’ll need to examine every step of your own supply chain to identify what parts of the process actually can be moved closer to where you’re based.

It’s also a major financial consideration. Even with delays and shortages taken into consideration, a global supply chain may still be better for your bottom line and for the price point you want to offer to customers.

Start small, go slow

Brandy’s advice for other brands that want to have a more local supply chain is to not jump all in at once.

“First start researching if there’s one part of the process that you can bring local and start small,” she says.

“Maybe it is just the cutting and sewing, or it’s your labels or whatnot. Find one local supplier that you can trust for that one process, and then once you feel confident after a couple of seasons, then maybe try to add another portion of it local.”

You can try looking for local associations relevant to your industry to seek out potential suppliers. Or, if you don’t make products yourself, you can use marketplaces like Shopify’s Handshake to find local wholesale suppliers.

A big jump is exciting, but may not be cost effective or sustainable for your company.

Communicate your changes to customers

Customers are looking for more sustainable brands to buy from, so don’t be shy about telling them that you’re committed to that cause.

Franc’s website has detailed information on their business practices, including where they source raw materials and where the clothes are manufactured. This has two benefits. First, it draws in customers who share Brandy and Franc’s ethical stance, connecting buyers to a brand they can believe in. Secondly, it also goes a long way to explain price points. Franc pieces cost more than something you’d get from a fast fashion brand, but customers know that price supports an ethical, sustainable supply chain.

Customers will even mention Franc’s practices in their reviews. “A total pleasure to be able to say, made in Canada, made in Ontario, responsible, sustainable, slow fashion. Choose wisely, Franc is a great choice,” one customer wrote.

Localizing supply chains also have a positive environmental impact by reducing carbon emissions from shipping. In our Future of Commerce report, the data shows that 44% of customers globally are more likely to buy from a brand with a clear commitment to sustainability. 

Plus, you’d be in good company—53% of companies are making improved sustainability one of their top priorities for 2022.

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Disruptions are here to stay

Experts anticipate that supply chain issues will persist into 2023, and it is estimated that major production disruptions can be anticipated every 3.7 years. That means there’s no better time than now to future-proof your supply chain.

Reshoring is a strategy that will work for some businesses, but not others. It’s up to you to examine your own supply chain and decide if moving some of the process closer to home is a good bet and one that will help your brand whether the next big disruption.

Illustration by Kiersten Essenpreis

This originally appeared on Shopify and is made available here to cast a wider net of discovery.

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