The connection between lean manufacturing and near-sourcing is drawn from the fact that near-sourcing is an aspect of the implementation of lean manufacturing. This link between lean manufacturing and near-sourcing can best be understood by knowing the meaning of the two terms. Lean manufacturing refers to a method of manufacturing that is specifically geared toward the maximization of profit through the trimming down of the production process by eliminating wasteful practices. Near-sourcing is a type of manufacturing practice that involves a purposeful decision by a business to obtain the necessary raw materials for production and other auxiliary production needs only from sources that are located near the production or manufacturing plant. In this sense, the connection between lean manufacturing and near-sourcing relates to the manner in which near-sourcing allows the company to achieve its aim of reducing all forms of waste.
Indeed, the relationship between lean manufacturing and near-sourcing can be seen in the manner that the decision to only obtain raw materials from nearby locations can be converted by the company to a form of competitive advantage. An illustration of this concept can be seen in the case of a company that manufactures prefabricated homes and is trying to implement lean manufacturing in its production processes. Part of such a process would be to obtain items like the materials utilized for the manufacturing process from only local sources that are within a stated radius. The aim of this would be to reduce the expenses that would have been incurred during the process of acquiring the materials from international or distant sources.
One of the expenses that would be eliminated, which further shows the link between lean manufacturing and near-sourcing, is the reduction of the cost for transporting the materials from their international or distant locations to the factory. Also eliminated by the application of near-sourcing is the removal of all of the duties that would have been paid as a consequence of the importation of the materials from international locations. For instance, assuming the company is importing materials like latex and certain types of fixtures from another country, it could eliminate the custom duties associated with the importation of the materials, in addition to the cost of the transportation and other necessary logistics like handling costs by buying locally. The process of sourcing locally would also mean that there would be fewer fees for the loading and offloading of the materials onto different transport media since the material would only be making a short trip to the factory.