The Importance of Being Local
Thanks to the establishment of free trade zones (such as the North American Free Trade Act), improved logistics techniques for handling goods and services around the world, and the falling costs of telecommunications, businesses find it much easier to access labour, manufacturing and marketing resources outside their home country.
Some business owners argue that the ability to outsource these services saves money and is more efficient. While this point is open to analysis on a case-by-case basis, there is still a convincing argument on why it pays to “go local” even in this era of an open global market.
In the case of hiring local employees to produce goods or deliver services, there is first little need to worry about cultural differences since both the company and the worker are from the same country and thus share common cultural foundations that ensure a cohesive working relationship. Local employees are also easier to perform background checks since their past work history in most causes can be checked against Canadian employment and law enforcement records.
Dealing with local vendors and suppliers is also a plus for several reasons. The time to have products and services delivered to a business locally is shorter and requires fewer customs checking and QR regulations, which in turn produces a lower delivery cost. Furthermore, local vendors and suppliers are subject to the same local business regulations a company follows, so that company is aware of what option are available in case agreements are violated. Filing a legal complaint against a foreign vendor or supplier for breach of contract is a more complicated process.
The process of first building and then maintaining a business network within a local sphere of influence, as opposed to creating a global distribution chain, is both faster and easier and not just because of fewer cultural barriers and regulations. Since each supplier and vendor will have their own local business network that is vetted for both reliability and trust, companies can simply incorporate that existing business network into their own with minimal time and effort.
Companies that use workers, suppliers and vendors in another part of the world might be at risk of disruptions due to geological, meteorological, political and social changes that do not exist in their home country. For example, the 2004 Chūetsu earthquake severely damaged Sanyo’s semiconductor plant and as a result the company recorded a huge financial loss for that year. Companies that import resources overseas are more at risk of terrorism and piracy, a serious concern where such logistic are time-sensitive. There is also the concern of employee theft of products overseas which are harder to police when compared to local employees.
A final argument to be made is the benefit of hiring local workers that extends to areas far beyond the operation of the business network yet are crucial to the very survival of the business itself. Local employees also make excellent consumers, and their willingness to buy goods depends on their interpretation of how secure their employment is (also known as consumer confidence). Those who are not working — in part due to offshoring practices — make poor consumers who will hoard their money and not move goods off the inventory shelves. A healthy economy powered by positive consumer activity generates tax revenue that pays for the infrastructure systems businesses need to move products and deliver services — roads, rail, and air. These taxes also support the social safety net that both businesses and workers rely on.