Last Friday, Spend Matters opined on a number of total cost and environmental implications of this announcement from Walmart suggesting that the retail giant is going to move towards a greater embrace of local sourcing for fresh produce (i.e., sourcing fruits, vegetables from local farms rather than leveraging regional or nationwide distribution). Even though I’m skeptical of how effectively this will work in practice for Walmart’s fresh produce, I think the concept of local — or at least regional — sourcing is one that we’ll see even more of in 2011. This will happen across industries, extending beyond the grocery business. But it won’t just occur because we want to be more “green.”
In fact, I see a number of reasons for an increase in working with more localized suppliers in general. Many of the reasons below have nothing to do with CSR initiatives:
- The more local suppliers are, the more we tend to know about any operational or financial risk factors they may pose based on local personal and professional relationships. In a bad economy, we’ll be more pensive than ever regarding how we can reduce or at least proactively act on risk. Local sourcing could very well play into this new emphasis.
- Let’s face it — the US dollar is a train wreck. Recent current movements suggest that the RMB (i.e., “Mao” money, as we call it in the office) and gold billets are probably a far safer near-term store of value than greenbacks backed by the full faith and credit of a government whose core competency is going into more and more debt with no end in site. Local sourcing will reduce the risk of overseas suppliers re-pricing contracts in local currencies or renegotiating based on the increasing lower value of the dollar.
- Given the general trend on both sides of the political aisle of looking at China’s continued currency manipulation and one-sided trade and investment policies …