Want to learn about managing supply chain resilience in a global world?
Businesses have always invested in supply chain diversification to maintain stability, build resilience, and for business growth. However, the Covid-19 pandemic has shown many companies worldwide that any crisis can lead to significant issues in the global supply chains. Additionally, it has been demonstrated that many businesses are over-relying on China for crucial manufacturing components and products. Lockdowns and production outages in China have had significant consequences for many industries, including the automobile market, electronics, consumer goods, pharmaceuticals, textiles, etc.
Businesses that want to remain competitive will need to adopt a diversification strategy.
What is supply chain diversification?
Supply chain diversification is when businesses increase the number of choices they have for procurement services. This way, they have access to many manufacturers from different locations across the globe.
Businesses invest in supply chain diversification because it provides them with more flexibility and a wide range of suppliers. This also helps companies build resilience in their supply chains, especially when manufacturers experience a backlog or other issues that hinder their performance.
Why Supply Chain Diversification is Important?
Why is supplier diversity important?
Here are three reasons why your business should invest in supplier diversity:
- Increased flexibility: Supply chain diversification gives businesses more flexibility and choice. This also helps companies respond to changing market trends and customer demands effectively. Moreover, firms that broaden their geographical supplier bases can deliver better customer service by decreasing backorders and avoiding supply shortages.
- Competitive prices: Businesses with a diversified supplier base can offer competitive prices to their customers at the local level, especially since small-medium businesses tend to be more flexible and focused on their customer base than large global suppliers.
- Reduce costs: Another benefit of supply chain diversification is that it helps businesses reduce costs. For example, the most prominent suppliers often don’t offer the same level of cost-efficiency as small-medium companies do. As a result, working with different suppliers can help enterprises reduce costs to a certain extent.
How to Execute Supplier Diversification in 3 Easy Steps
Here are three ways your business can achieve supplier diversification:
- Moving from large to medium/small-sized suppliers: Businesses have preferred to rely on large suppliers for their products in the past. These large manufacturers offer businesses reliability and security since they have a worldwide reach and are unlikely to close. Nowadays, businesses partner with small and medium-sized businesses since they provide more flexibility and lower costs.
- Diversifying across a range of economies: The Covid-19 pandemic has shown that too many countries rely on China for manufacturing components and other products. As a result, businesses need to consider shifting their sourcing to a wide range of economies. Some economies companies can consider are India, Indonesia, Vietnam and the Philippines.
- Invest in digital solutions: Digital solutions like supply chain management software make it easier for businesses to onboard a new supplier. These digital solutions also have features to help enterprises create automated workflows and checklists for audits and inspections. The automation of these processes means that businesses can focus on creating better relationships with their suppliers and improving their supply chain processes. Moreover, supply chain management software can help enterprises make proactive, informed decisions using real-time data and efficient risk analysis.
If your company would like some help with their supply chain, visit the Bisham Consulting website. We are an independent supply chain consultancy firm. We deliver commercial, practical, operationally proven results for our clients in the UK and Ireland, Pan-European and around the World.
Contact us today on 01628 487000 to learn more about how you can achieve supply chain resilience.