Small Business Financing: Can Finding Local Suppliers Help Keep Costs Down?

by / Tuesday, 08 July 2014 / Published in Salon Business Financing

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Within a small business, the costs involved in obtaining inventory can be among the largest and most important to balance in a budget. In addition, many business owners get into trouble with their cash flows either because of a lack of adequate inventory when it is needed or alternately a surplus that they cannot translate into cash quickly enough to meet their needs. The financing of a small business gets a lot easier the lower inventory costs become, so if there is a possibility that business owners can replace some of their inventory suppliers with lower cost alternatives without sacrificing quality, then they should seriously investigate those possibilities.

Buying locally can be a viable strategy for keeping inventory costs as low as possible. One of the strongest benefits of buying locally produced inventory is in the costs associated with shipping, which will usually be a lot lower the closer that a supplier is to a small business’s locations. The price of shipping can fluctuate as well based on regulations, which the logistics industry is prone to. The possibility of even more driver regulations and health mandates being put into place means that a shipping option which may be currently viable could get taken off the table in a worst case scenario. Shipping the shortest possible distance from a supplier is also better for the environment and reducing a business’s carbon footprint.

Buying local is good for branding. Saving on the costs of shipping and logistics may not be the only benefit produced by purchasing locally as a business. Buying locally can allow small businesses to support each other, and the popularity of locally produced products can contribute significantly to small business community building and branding efforts, for example through buy local campaigns. Should your business wish to show off local production and suppliers, getting in contact with local chambers of commerce, business incubators, and news services can help to create a DIY public relations campaign drawing attention to the economic and cultural benefits of independent entrepreneurship.

Local suppliers may be able to deliver inventory faster. The fact of being local may bring another strategic advantage as suppliers to other local businesses, since the proximity of producer to buyer means that shipping may not only cost less, but arrive faster. Since small businesses rely so heavily on being nimble in order to succeed in the face of corporate competition, win contracts with larger companies, and respond to other local competitors, they should seriously consider a potential speed benefit from local production when weighing merits of suppliers.

Photo Credit to Steve Garfield on Flickr

One Response to “Small Business Financing: Can Finding Local Suppliers Help Keep Costs Down?”

  1. In addition to saving on inventory related expenses such as shipping and handling, utilizing local suppliers can also come in handy should your business be experience a cash flow squeeze. The ability to head over to their business in person and speak to them to see if you can negotiate payment responsibilities if cash is tight for a week or two is something that not a lot of companies enjoy. Building strong ties with other local businesses will help you in the long ruin.

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