Let’s begin with how exactly did we stumble upon the importance of localised procurement?
In June 2016, Bizongo had a client who had placed an order for pizza boxes all the way from Pondicherry. Back then, we had a strong partner base in Mumbai and Gujarat as the company was building its foundation. Hence, sourcing packaging products for the clients was only via the partners we had on-boarded.
But, after analyzing the procurement and shipping costs, we eventually realized that the packaging budget of the client shot up by almost 40%.
Even though the client agreed to pay the excess, given his remote location and the urgency of the order, we realized that localized procurement of packaging supply was a grave problem, especially for companies dealing in secondary and tertiary packaging with stringent budgets.
So, What Does Localised Procurement in Packaging Mean?
Localising the packaging simply means sourcing packaging materials from vendors that are closest to a client’s location.
In other words, if you are a company based out of Bhopal, all your packaging should ideally be sourced from Madhya Pradesh or at least Central India.
But this activity of searching for new vendors for every packaging product becomes extremely time consuming and takes up a lot of unnecessary bandwidth of your procurement manager. Hence, companies usually choose the vendors based on reputation and decent quotations but irrespective of the manufacturing units’ location.
Advantages of Localised Packaging Procurement
In the article below, we have highlighted the complete benefits of how localizing packaging supply can be beneficial to clients in several different ways.
#1 Save on Logistics Costs
One of the biggest advantages of localising your packaging supply would be saving on the massive logistics costs and other essential formalities that entail the delivery of the shipment.
Almost a year ago, another client of ours wanted corrugated boxes to ship mangoes across four cities in India: Mumbai, Bangalore, Delhi, and Kolkata. At the time our supplier base was majorly present in the Western region. It was not only expensive but also a very time-consuming process as tracking goods all the way from west to other regions was a huge task.
Analysing this situation, Bizongo built a strong supplier base across these regions within a few months and the results were phenomenal:
Shipment which used to take 10 -12 days reduced to 2-5 days; that is almost 60%-80%.
Due to decreased fuel and labor costs, the overall cost of shipment also reduced by 32.5%
#2 A Better Understanding of Prices
As policies change from state to state, it directly affects the prices at various stages. Being from the same state, it only becomes easier to understand the various price ranges by localizing your supply. Thus, the knowledge of an estimated price for a particular product based on its quality and other specifications is a huge plus point.
#3 Faster Fulfilment Time
With suppliers near your area, fulfilment time drastically gets reduced because of awareness of weather conditions, lower formalities, and labour unavailability for long-distance transits.
#4 Return of Goods Becomes Easier
The probability of damage occurring to the goods during transit decreases radically as the distance and time required for the goods to reach the intended destination are shorter. Also, in case the goods do not meet the required specifications, the process of returning the goods and getting a new batch becomes faster and easier.
#5 Long-term Relationship Because of Local Rapport
Being from the same region, it is easier to share a certain sentiment of familiarity in terms of language and mindset. This familiarity helps in breeding long-term relationships which are beneficial for the overall ecosystem in the area. It also helps one grow sustainably to mutually benefit each other. By localizing your supply, you also help the regional suppliers grow by encouraging them to bring in new technology and more automated systems.
Instead of hunting for suppliers nation-wide, a company can completely transform its procurement activities by entertaining and collaborating with local suppliers. After all, supply only increases when demands do.
Localised packaging procurement can be your go-to solution when it comes to optimizing packaging cost. With technology coming into play, there are softwares that could aid the process of vendor discovery and make the implementation of localised procurement even easier!
Here’s how Tata Cliq Procured Packaging for 1700+ Locations without Breaking a Sweat
Nonetheless, there are some more strategies that you could apply to improve your company’s bottom line by optimizing the packaging cost.
However, if you are not facing this challenge, you can read about the solutions to 4 Commonly Faced Challenges in the Packaging Industry.
What is the challenge you usually face when it comes to packaging? Let us know in the comments section!1