We have given you an understanding of your supply chain and you now know the three flows of supply chain. One of the main goals of a supply chain is to build efficiency along the chain, but more importantly is to have a supply chain that is agile, adaptable and aligned.
Along with the other benefits that local production brings to Nigeria, local production shorten’s the supply chain. There are benefits that come with a shorter supply chain. Here are the main benefits.
Speed to market
This is the most upfront benefit. With a shorter supply chain, you can bring your product to the market faster. If you are a juice manufacturer in Lagos and you source all your fruits from a farm in Ogun, the proximity to your supplier makes it possible to produce your juice faster.
Better understanding of the Market
The closer you are to your suppliers and customers, the shorter the distance the flows of supply chain have to travel. What such proximity fosters is an ongoing interaction between everyone along the supply chain. With each interaction, everyone along the supply chain learns something new about their supplier and customer building long-term business relationship. With such ongoing interaction, each member of the supply chain learns about the market and is able to adapt their business so that its interests align with the interests of the entire supply chain.
“with a shorter and more localized supply chain, the exposure to foreign exchange risk is reduced”
Protection against foreign exchange risk
Recently, we have seen how the reliance on imported supplies have adversely affected Nigerian businesses with the current exchange rate for the Naira. With a shorter supply chain, in which most of the suppliers and supplies are locally sourced, businesses will reduce their exposure to foreign exchange risk and increase stability of their cash flow.
Building and supporting local markets and local ecosystems
By having a shorter supply chain, you are supporting business around you. Every step along the supply chain, value is added and the aggregate value of the supply chain goes directly into supporting the local markets and economy. Direct economic benefits of a shorter and localized supply chain result from lower materials, energy, and labor costs.
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