However you feel about climate change and the best practices to curb its effects, a few things have become abundantly clear to supply chain managers:

1. Sustainable practices must be immediately initiated throughout all industries if supply chains are to survive.

2. One of the best and easiest ways to improve sustainability is to focus on working with local businesses and using regional ecosystems.

In this blog post, we'll explore what regional ecosystems are, their key benefits for reducing complexity and environmental impact, and how they can strengthen your supply chain's resilience against global disruptions.

In light of research from 2016 demonstrating that a staggering 80% of greenhouse gas emissions come as a result of a company's supply chain rather than its own processes, the days of partnering with suppliers located solely all across the world are numbered. As more companies focus their efforts on eco-friendly approaches and strategies, they're looking for ways to utilize more local solutions. This new push is towards supply chains composed in, large part, of domestic businesses. These partnerships help reduce greenhouse gas emissions in some measure.

This shift toward regional ecosystems will serve to decrease some of the complexity of the supply chain, lessen the environmental impact of the supply chain, and increase the resilience of supply chains to widespread issues, such as those caused by the COVID-19 pandemic.

While this approach can decrease some of the complexities found in international shipping, it also introduces new challenges such as local sourcing and manufacturing.

What are Supply Chain Regional Ecosystems?

In industry lingo, a regional ecosystem is an interconnected web of businesses located within a relatively small area that, together, make up a local supply chain. This means that suppliers, manufacturers, and other companies involved in the process can more easily work with one another to most effectively manage the flow of certain goods within the domestic regions in which they share business dealings. These businesses are in the same country, often within the same state, and in some cases, perhaps even in the same city or town.

Compare this with a global supply chain, where all parts of the system spread out across the world. A global supply chain may consist of a supplier in one country, a manufacturer in another, and additional parts of the process in their own respective countries.

Benefits of Regional Ecosystems

Regional ecosystems provide numerous benefits to supply chains. The following three benefits are some of the main reasons why supply chain managers have shifted their focus from primarily global supply chain strategies to more domestic ones.

Decreased Supply Chain Complexity

Having everything in one relatively confined region is much easier to manage than navigating the complexity of global trade, making this one of the most intuitive benefits of a regional supply chain. Decreased complexity also provides supply chain managers with extra time which can be devoted to improving processes rather than triaging situations that develop across a complex global system.

Lower Environmental Footprint

When goods only need to travel a few miles, or even a few hundred miles, the environmental impact is significantly lower than when said goods have to travel thousands of miles from other countries. Maintaining a regional ecosystem means that supply chains produce generally fewer carbon emissions than they would if they focused on more international trade. Having said this, this statement does not always hold true and depends on the situation.

For instance, even if you maintain a good regional ecosystem, that does not automatically imply that you do not deal in anything outside of your city, state, or country. It can indeed help cut down on your carbon footprint, but if you turn around and double down on international shipping, you begin to negate the benefits again. There is a balance that needs to be maintained in order to reap the eco-benefits of regional ecosystems.

In an age where environmental sustainability makes headlines daily, this is an incredibly important point to keep in mind.

A More Resilient Supply Chain

Issues like those caused by the COVID-19 pandemic were primarily seen as thought experiments prior to 2020. You likely never dreamed that the world would be so drastically affected by a virus until it actually happened.

While it's hard to say that any part of the pandemic has been good, the issues it caused have brought to light just how vulnerable and complex global supply chains are in their present state. This has helped supply chain leaders gain a better understanding of these weaknesses and identify ways to fix them.

Comparatively, regional supply chains had a better ability to adjust throughout the pandemic. Many experts predict that regional supply chains will lessen the dependence on overseas manufacturing, giving countries more autonomy in their supply chain practices.

All in all, slightly delayed shipments of goods were better than goods that couldn't come into the country at all due to travel and transport restrictions. It took a pandemic for many supply chains to realize just how dependent you may have been on these global manufacturing relationships.

Frequently Asked Questions

What is a regional ecosystem in supply chain management?

A regional ecosystem is an interconnected network of suppliers, manufacturers, and logistics providers located within a relatively small geographic area. This localized approach enables businesses to work together more efficiently while reducing transportation distances and complexity.

How do regional ecosystems reduce carbon emissions?

When goods travel shorter distances—a few hundred miles instead of thousands—transportation-related emissions decrease significantly. Regional ecosystems minimize the need for long-haul international shipping, which is one of the largest contributors to supply chain carbon footprints.

Can regional supply chains handle large-scale disruptions better than global ones?

Yes. Regional ecosystems proved more resilient during the COVID-19 pandemic because they weren't as dependent on international borders, shipping routes, and overseas manufacturing facilities. Local networks can adapt more quickly to changing conditions and maintain operations during global crises.

Do you have to eliminate all international suppliers to build a regional ecosystem?

No. Building a regional ecosystem doesn't mean completely abandoning international partnerships. The goal is to balance domestic and international sourcing strategically, prioritizing regional partners where possible while maintaining necessary global relationships for specialized products or materials.

Final Thoughts

Across the world, but in America specifically, regional ecosystems are the ones looking to lead the charge into better, more resilient, and sustainable supply chain practices. It's unlikely that supply chains can continue on their current trajectory as environmental sustainability concerns rise with every new large-scale natural disaster.

Supply chains spread across the world are particularly susceptible to global disruptions from pandemics and natural disasters, and perhaps the best way to overcome these issues is by tightening up operations and turning your attention to what you can do locally.

There may be inexpensive or more abundant products in other countries, but at this point, the long-term risk to sustainability, resiliency, and eco-friendliness doesn't seem to be worth the potential benefit.

Ready to build a more resilient regional supply chain? Contact Redwood today to learn how our Modern 4PL approach can help you optimize your logistics network for sustainability and efficiency.