Procurement Glossary
Localization: Strategic procurement through regional supplier selection
November 20, 2025
Localization refers to the strategic orientation of procurement towards regional or local suppliers and markets. This procurement strategy is becoming increasingly important as companies seek to make their supply chains more resilient while reducing transportation costs. Find out below what localization involves, what methods are available and how current trends are affecting regional procurement.
Key Facts
- Localization reduces transport costs and CO2 emissions thanks to shorter delivery routes
- Regional suppliers enable faster response times and more flexible adjustments
- Local procurement strengthens security of supply and reduces geopolitical risks
- Cultural and linguistic proximity facilitates communication and collaboration
- Localization supports sustainable procurement strategies and corporate social responsibility
Contents
Definition: Localization
Localization in Procurement involves the systematic shifting of procurement activities to regional or local markets and suppliers.
Core aspects of localization
Localization is based on several strategic elements that enable successful implementation:
- Geographical proximity to production sites or sales markets
- Development of regional supplier networks and partnerships
- Adaptation to local market conditions and regulations
- Integration of cultural and linguistic conditions
Localization vs. global sourcing
In contrast to global sourcing, localization focuses on opening up regional procurement markets. While global sourcing often offers cost advantages through international suppliers, localization focuses on flexibility, sustainability and risk minimization.
Importance of localization in Procurement
Modern procurement strategies integrate localization as an important building block for resilient supply chains. The regional focus supports both operational efficiency and strategic sustainability goals.
Methods and procedure for localization
The successful implementation of localization strategies requires structured methods and a systematic approach.
Market analysis and supplier evaluation
A well-founded market analysis forms the basis for successful localization. Regional supplier markets are systematically recorded and evaluated:
- Identification of potential local suppliers
- Assessment of capacities and quality standards
- Analysis of cost structures and pricing
- Examination of certifications and compliance requirements
Step-by-step implementation
Localization typically takes place in several phases in order to minimize risks and take advantage of learning effects. Pilot projects with selected material groups allow regional procurement approaches to be tested.
Supplier development and integration
Local suppliers often need support in developing their skills. Targeted development programs and close cooperation promote the qualification of regional partners and create long-term partnerships.
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Important KPIs for localization
Measuring the success of localization strategies requires specific key figures that reflect both operational and strategic aspects.
Degree of localization and regional distribution
The share of local suppliers in the total procurement volume shows the progress of the localization strategy. This key figure is typically broken down by material groups and geographical regions:
- Local procurement share as a percentage of total volume
- Number of active regional suppliers
- Average distance to suppliers
Cost efficiency and savings
The economic impact of localization is measured using various cost indicators. In addition to direct material costs, transportation, storage and transaction costs are also included in the assessment.
Delivery performance and flexibility
Regional suppliers often offer advantages in terms of delivery times and flexibility. Corresponding KPIs measure the operational performance and responsiveness of local supply security.
Risk factors and controls during localization
Localization strategies entail specific risks that must be minimized by means of suitable control mechanisms.
Limited supplier base and capacities
Regional markets often offer a limited choice of suppliers, which can lead to dependencies and capacity bottlenecks. Dual sourcing and systematic supplier development reduce these risks:
- Establishment of redundant supplier structures
- Continuous market observation and development
- Flexible capacity agreements
Quality and compliance risks
Local suppliers may not meet all the required quality and compliance standards. Structured suitability checks and continuous monitoring ensure compliance with the requirements.
Higher procurement costs
Regional procurement can lead to higher purchase prices if local suppliers do not achieve the economies of scale of global suppliers. However, a holistic total cost of ownership approach also takes into account savings in transportation and warehousing.
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Practical example
An automotive manufacturer implements a localization strategy for electronic components. Through systematic market analysis, the company identifies regional suppliers within a radius of 200 kilometers from the production sites. The gradual shift of 30% of the procurement volume to local suppliers reduces transportation costs by 15% and shortens delivery times from an average of 14 to 5 days.
- Establishment of a regional supplier pool with 12 qualified partners
- Implementation of digital ordering processes for just-in-time deliveries
- Establishment of regular quality audits and development programs
Current developments and effects
Current market developments are strengthening the trend towards localization and creating new opportunities for regional procurement strategies.
Digitalization and AI support
Modern technologies are revolutionizing localization through improved transparency and efficiency. AI in Procurement enables the automated analysis of regional markets and the identification of suitable local suppliers:
- Automated supplier search and evaluation
- Predictive analytics for market developments
- Optimization of regional procurement routes
Sustainability and ESG requirements
Increasing sustainability requirements promote localization as an instrument for CO2 reduction. The Supply Chain Act also strengthens the focus on transparent and responsible regional procurement.
Reshoring and nearshoring movements
Reshoring and nearshoring support localization strategies through the relocation of production capacities. This development creates new opportunities for regional supplier partnerships.
Conclusion
Localization is becoming a central pillar of modern procurement strategies that combine sustainability, flexibility and risk minimization. The systematic development of regional supplier markets enables companies to make their supply chains more resilient and increase operational efficiency at the same time. However, successful localization requires a structured approach, continuous market analysis and targeted supplier development. In an increasingly volatile global economy, regional procurement offers an important building block for sustainable and competitive companies.
FAQ
What is localization in Procurement?
Localization refers to the strategic orientation of procurement towards regional or local suppliers and markets. The aim is to achieve advantages in terms of costs, flexibility and sustainability through geographical proximity. The strategy includes the systematic development of regional supplier networks and adaptation to local market conditions.
What are the advantages of a localization strategy?
Localization reduces transport costs and CO2 emissions, shortens delivery times and increases flexibility in the event of changes in demand. It also strengthens security of supply by reducing dependence on global supply chains and supports sustainable procurement goals. Cultural and linguistic proximity also facilitates communication with suppliers.
How do you measure the success of localization measures?
Success is measured by various KPIs, including the share of local suppliers in the total procurement volume, cost savings in transportation and warehousing as well as improvements in delivery times and reliability. Other important KPIs include the average distance to suppliers and the number of active regional partners.
What risks need to be considered during localization?
The main risks include a limited supplier base, possible capacity bottlenecks and higher cost prices compared to global suppliers. Quality and compliance standards of local suppliers can vary. These risks can be minimized through systematic supplier development, dual sourcing strategies and continuous market monitoring.
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