The Benefits of Local Sourcing: Supply Chain Resilience (3/5)
In this week’s blog post, we examine another advantage we have identified from regional...
In this week’s blog post, we examine another advantage we have identified from regional sourcing and manufacturing: businesses and communities that emphasize regionality and circularity face less disruption to market shocks than those reliant solely on global supply chains.
The COVID-19 pandemic has revealed major weaknesses in the global supply chain model as the flow of raw materials to production and manufacturing facilities has become significantly disrupted in many places. This lack of resiliency has contributed to a record number of people who now find themselves out of work as businesses attempt to grapple with the consequences this disruption has had on their operations and balance sheets. And of course, this disruption has also had a negative impact on the communities in which these businesses operate. By not relying solely on global supply chains, we have seen that regional networks of suppliers and manufacturers have been crucial for helping companies and communities weather this crisis.
In a world that is increasingly interconnected via sophisticated technology, the concept of distance has been permanently altered. The general thinking goes something to the effect of: “If I can send someone a message half-way around the world and they can receive it almost instantly, getting my supplies shipped from point A to point B should be no problem.” However, the pandemic has proven that this is simply not the case. In practice, the less distance that must be covered throughout the lifecycle of a product as it is converted from raw materials, manufactured, sold, used, and recovered, the greater the degree of predictability and reliability there is for all the businesses involved. Sana Packaging’s supply chain, for example, utilizes a network of global and regional suppliers and regional manufacturers. This has allowed Sana to generally continue with our pre-COVID-19 manufacturing schedule and has helped our customers maintain their usual supply of inventory with minimal disruption.
Resiliency is a particularly important characteristic for businesses and communities in times of crisis. It also highlights why we think it is essential to move towards a circular economic model. Throughout the pandemic, many companies around the world have had to make excruciating decisions to layoff or furlough employees (along with cutting costs in other ways) because their supply chains or business models have been significantly disrupted. This creates a tremendous ripple effect because the people who lose their jobs are often unable to continue reinvesting in their local communities. In other words, the entire community suffers when businesses fail (in part) due to an over-reliance on global supply chains. However, the opposite is true under the tenants of a circular economy because resources continue to circulate and recirculate within local and regional communities, which helps stimulate local economies in times of crisis.
We believe that when businesses are more resilient to shocks and disruption, the entire community becomes more resilient. This is essentially the concept of circularity in “action,” and illustrates the impact that striving towards a circular economy has on the environment and local communities. When the links of a company's supply chain have direct ties to the communities in which a company operates, there is a greater degree of willingness for both companies and individuals to go above and beyond the “ordinary” call of duty. Thus far, Sana’s supply chain has proven to be resilient throughout the COVID-19 crisis thanks to our suppliers, manufacturers, and customers all buying into the concept of circularity.
While most of us alive today have never experienced a global health crisis on the scale of the COVID-19 pandemic, countless events throughout our lifetimes have caused significant shocks to the market. In 2019 and 2020 alone, events ranging from political uncertainty to natural disasters have all caused major supply chain disruptions across the globe. And if there's one thing we can be certain of, it's that events beyond our control will continue to cause market shocks in the future, even if we cannot predict the nature of the specific crisis or when these shocks will occur.
Global supply chains are especially susceptible to disruption because there are so many interconnected pieces, many of which are at the mercy of a tangled web of geopolitical issues. This only adds to uncertainty and further decreases reliability. On the other hand, utilizing regional suppliers and manufacturers can give companies a greater degree of flexibility to make the kinds of small tweaks and changes that are necessary to navigate a crisis. And the ability to respond to crises effectively and efficiently gives businesses and communities as a whole a greater degree of resiliency. And ultimately, this resilience can not only save businesses time and resources but can also be the difference between a business and an entire community being able or unable to withstand a major market shock.
Written by: Galen Kuney, Sana Packaging Intern