Navigating global disruptions
The ongoing impacts of COVID-19, especially in key countries like China, along with financial uncertainty and geopolitical tensions, are causing disruptions in global goods distribution. Challenges like shipping bottlenecks and labour shortages persist, requiring proactive steps.
However, moving operations to other places, like Vietnam or Taiwan, or nearshoring in locations like Mexico, may be tempting but it can bring new challenges that need careful consideration.
In this article we discover steps to successfully diversify your supply chain to meet your businesses needs and why balancing and understanding these risks is essential.
Why diversify your supply chain?
Supply chain diversification is more than just having different suppliers or manufacturing channels – it's the foundation of a strong and adaptable supply chain.
It means creating flexibility and backups to reduce risks and increase agility. This can be done by working with a variety of suppliers, reimagining how things are made and distributed, and having backup plans for logistics.
Companies in various industries are already changing how they source materials, where they manufacture, and how they distribute.
According to a recent study by Ernst and Young, 77% of companies surveyed plan to increase their number of suppliers, and 55% are making big changes to who they work within the next two years.
The goal is to be more responsive, agile, and competitive. This change will also affect how things are moved around, from exploring new areas to changing how things are transported.
But these changes don't happen overnight. Companies that want strong supply chains need to understand their options and the details of how things move. By embracing supply chain diversification, businesses can make sure they're ready for whatever comes their way.
Mastering supply chain diversification: 11 key steps for success
Successfully diversifying your supply chain involves a strategic and well-planned approach. Here are eleven key steps to ensure a successful diversification process:
1. Evaluate & analyze: Assess your current supply chain, pinpoint vulnerabilities, and identify risks.
2. Set clear goals: Define objectives for diversification, like reducing dependence and enhancing agility.
3. Choose wisely: Research and select new suppliers strategically.
4. Build relationships: Cultivate strong partnerships with multiple suppliers.
5. Plan for risks: Develop a robust risk management strategy.
6. Prepare for scenarios: Create solutions for potential disruptions.
7. Invest wisely: Allocate resources for technology and training.
8. Stay agile: Adapt to changing circumstances and market trends.
9. Monitor continuously: Keep an eye on supplier performance and industry developments.
10. Collaborate: Work closely with new suppliers for mutual benefits.
11. Keep open communication: Maintain transparent and regular communication.
By following these steps and tailoring them to your specific industry and organization, you can successfully diversify your supply chain, reduce risks, and position your business for greater resilience, agility, and long-term success.
Success through a balanced supply chain
Essentially, understanding and balancing the risks of supply chain diversification equips you with the knowledge to make strategic choices.
This approach cultivates a sturdy and flexible supply chain, ready to navigate diverse challenges and uncertainties. Balancing risks ensures protection against disruptions, aids cost evaluation, optimizes resource allocation, boosts sustainability, and secures enduring advantages.
Aligning with best practices
Standards are essential in supply chain diversification, offering a structured framework for assessing and managing risks.
They ensure alignment with best practices, enhance communication, and establish quality benchmarks. By promoting responsible practices and ethical considerations, standards contribute to sustainability and resilience, guiding informed decisions for successful diversification.
