The decision making for diversified supply chain

Diversifying the supplier base can deliver powerful advantages such as resilience against changes and disruptions in supply chains. But diversified supply chain is subject to the analysis that clarifies the tradeoffs. What is abundantly clear is that it’s not feasible or appropriate to try and apply a ‘one size fits all’ solution to your business. You need to analyze the risks of different sourcing strategies that are specified to your business. This helps you make the best decisions to either carry or mitigate the risks in your sourcing activities. Ideal analyses often suggest different sourcing strategies specific to the class and significance of the materials or goods. For example, Class A products that drive the revenue might hold high risks when sourced from multiple suppliers. However, keeping a higher price backup supplier for them reduces risks in case of a dramatic supply chain disruption.

Tiering suppliers based on the factors important for your business is crucial, especially for consumable brands dealing with market fluctuations. They benefit from diversified supply chain model during uncertainty. This strategy enables your business to respond swiftly to market volatility. When peak demand exceeds your Tier 1 supplier’s production capacity, Tier 2 suppliers can provide additional capacity.

Supplier management and ESG while critical, make it harder for your business to focus on your primary business functions. For that reason, outsourcing such services from third parties eliminate the excess burden on your business.

Optimizing Your Supply Chain: Strategies for Managing Multiple Suppliers’ Costs

Diversifying suppliers is a key strategy to enhance profitability and competitiveness in your supply chain. By having multiple suppliers, you reduce dependency on a single source, mitigating risks associated with disruptions and ensuring a continuous flow of goods. It allows you to negotiate better terms and prices, driving down costs. Additionally, diversification fosters innovation and flexibility. Suppliers bring unique strengths, technologies, and ideas, enabling your business to adapt to market demands swiftly. Effective communication and collaboration with diverse suppliers can lead to valuable insights and collaborative problem-solving, further enhancing the overall efficiency of your supply chain. Consider supplier performance metrics, track delivery times, and quality to make informed decisions and foster long-term partnerships, elevating your supply chain’s profitability and competitiveness.

Does your business have the technical capabilities to manage additional suppliers?
Can you leverage the subject matter expertise in supplier management?
Let us help you answer these questions