Using local vendors has become a big thing in the restaurant world. You can’t watch a show on the Food Channel without hearing someone talk about “buying local.”
That’s because in the restaurant business, buying from local vendors has a number of business and social benefits. Food is fresher as it is delivered from nearby farms (or rivers or oceans or bays). Transportation costs less as there are fewer miles between farm/water and the dinner table. And with fewer miles to drive, there is a much smaller environmental footprint.
But what if you aren’t in the food business? Does buying local make sense for you? I say yes…and no. Here’s why.
Buying from local vendors has a number of advantages. One is that you can be a bigger fish in a smaller pond. Since local vendors tend to be smaller, your purchases with them are bigger (and more important). Higher importance generally means more attention – oftentimes from the owner – both when things are going well and when they aren’t.
Another advantage is that local businesses tend to have a better understanding of the local market because their ultimate success is driven by it. This generally leads to a much greater interest and participation in the local community, and a better handle on where it’s been and where it’s going.
But there are also challenges to buying from local vendors. The most obvious is price. While local vendors can certainly compete with their larger regional, national and international competitors in the short-term, they generally don’t have the cost structure and scalability to maintain those prices in the long run. And if they do try to maintain them, something else generally has to give in terms of quality and/or service.
Another challenge is the ability for local vendors to service different geographic regions, both domestically and internationally. Larger vendors have established distribution systems on a broader scale, and can provide consistent goods, pricing and service levels across multiple geographic areas. They also generally provide a broader array of services and can support more complex needs. Using a single vendor for more complex and geographically disburse needs not only increases buying power, it centralizes quality control and reduces the number of vendor relationships that need to be managed.
I love buying locally, and our company does so deliberately when it makes sense. But we understand that local buying has a place in a broader vendor strategy, and that the best-run organizations have a well-designed portfolio of local, regional and national/international vendors. A good strategy requires organizations to thoughtfully, and deliberately, leverage their entire vendor portfolio to meet both their business and social objectives.
Author: Tom Rogers
Job Title: CEO
Organization: Vendor Centric
Tom is the founder and CEO of Vendor Centric, he has been a trusted advisor to nonprofit organizations for 30 years, with a focus on helping them align the right people, processes and systems to mitigate third-party risk and drive more value from third-party contracts and relationships.