Near sourcing as a sustainable procurement strategy
The concept of outsourcing business processes or systems to overseas companies where labour costs are cheaper is a well-recognized business strategy. But in terms of sustainability for transportation and communication, it can leave a lot to be desired. Near sourcing (also termed nearshoring) is a newer concept that is gaining ground and could be an option for fleets in terms of sustainable procurement.
Near sourcing sees facilities and services being outsourced to operations that are geographically closer to a business’s home country. This can be in the same region, continent, or even the same country. It’s about finding the best balance between cost savings and proximity. Although labour costs may not be much cheaper, the cost of transportation between sites often is. This also helps reduce the carbon footprint of the near sourcing client. It also means you don’t have to deal with timezone differences or that their effect is at least minimized.
Near sourcing also enables fleet businesses to maintain tighter control over the outsourcing process, which can help keep projects on track and control costs.
Advantages of near sourcing for fleets:
- Cost savings: Near sourcing can be cheaper than outsourcing to more distant countries due to lower transportation and communication costs.
- Lower CO2 footprint: Lower transportation and communication costs also result in a lower carbon footprint.
- Cultural similarity: Near sourcing often means outsourcing to countries with similar cultures, which can make communication and collaboration easier.
- Time zone proximity: Being in the same time zone can allow for better communication and faster response times.
- Reduced risk: Near sourcing to countries with stable political and economic systems can help reduce the risk of disruption to the outsourcing process.
As with all initiatives, there are disadvantages to near sourcing and these can include:
- Limited talent pool: Depending on the location, the talent pool may be smaller than in other locations, making it harder to find qualified personnel.
- Language barriers: Even though near sourcing to countries with similar cultures may reduce communication barriers, language barriers may still exist. This is especially true in diverse regions such as Europe.
- Cost competitiveness: While near sourcing can reduce costs, it may not always be as cost-effective as outsourcing to more distant countries.
- Competition: Some countries in the same region may be competing for the same outsourcing projects, which can drive up costs.
Near sourcing can be a beneficial outsourcing strategy for businesses looking to reduce costs while maintaining control over the outsourcing process. However, it is important to consider the potential advantages and disadvantages before deciding on a near sourcing strategy for your fleet management.
Near sourcing is the first topic on the agenda of the Global Fleet Conference 2023, 15-17th May, Cascais, Portugal, the main theme of which is Sustainable Procurement. Near sourcing can be a valuable tactic in fleet procurement that recognizes the benefits of globalization while keeping in mind the relative benefits of globalization versus regionalization, and the importance of regional differences in economic development. Registration is open now.