HomeUncategorizedHow diversification helps de-risk supply chains

How diversification helps de-risk supply chains

Western businesses refocused provide shackles Shifting to low-cost economies including China has become increasingly risky since the turn of the century. Andrew Black, Director at EfficioExplain why provide chain diversification now a business requirement.

Provide shackles across the globe have faced unimaginable disruption in recent years. From the ongoing ramifications of the pandemic, which caused severe delays to production and shipping, to the war in Ukraine, organizations across many industries have been left in a precarious and difficult situation. . The chain effect of such events has exposed the fragility of the present provide shackles, forcing business leaders to analyze existing ways of doing things. Inflation and soaring interest rates only add to this, underscoring the need for stronger growth provide shackles can bend and absorb the impact of future disturbances.

For decades, global businesses have seen outsourcing production in low-cost countries as the main way to reduce overall costs – but this has proven to be an outdated strategy and often fraught with risks. For example, China is seen as the leader in these low-cost, high-capacity jurisdictions.

Howmore than ever, amid rising tensions between China and the West, rising costs within China, and a growing perception that provide shackles vulnerable to shocks, many companies are realizing that this strategy has its own costs. Concerns like these have fundamentally changed provide landscape sequence. Following a strong push by the Trump and Biden administrations, as of 2022, the United States now regularly imports more goods from Europe than from China — a big change from the 2010s.

Many of the changes we are witnessing represent the beginnings of long-term structural changes. With many companies now diversifying provide facilities, businesses can reduce distribution shortages and disruptions, restore continuity, and enhance resilience. In fact, 7.5% of businesses in the UK have made major, transformative changes to their business. provide shackles within 12 months of the end of the Brexit transition period, mainly suppliers diversification and close to shore.

As the world continues to weather the chaos of conflict and inflation – and with the impact of the pandemic still being felt and climate change a serious threat ahead – there is no good time. more to reassess your business provide chain and implement a more flexible program with strategies to weather future disruptions and be more sustainable.

What is holding businesses back?

While diversifying your business provide Improving your position when it comes to responding to geopolitical events, natural disasters and inflation, there are several challenges to consider along the way.

Although diverse provide less vulnerable to external shocks, there are significant logistical obstacles to maintaining a complex, diverse provide chain. Multiple suppliers in different countries require considerable management time and effort. Embark on a Diversified Strategy provide The chain cannot be half-done – to be an effective hedge, each supplier relationship must be actively managed and well maintained.

Another problem hindering businesses is the complexity in identifying suppliers that meet their procurement criteria. Successful Diversity provide The chain program must deliver the right level of quality, cost, risk, capability and reliability – and share your values ​​and goals. Another obstacle can be the lack of data and insights about your suppliers. Without this, learning about new potential suppliers, building relationships and growing your diverse business network provide partners can be difficult.

These challenges, However, are problems that businesses seem to be trying to overcome. According to a recent report from Make UK, more than 80% of the UK manufacturing industry has diversified their products. provide shackles and nearly a third of companies have increased the number of suppliers. In the midst of a world of uncertainty and growing consumer expectations, companies must put provide chain diversification leadership programs to manage future disruptions, such as geopolitical events, natural disasters, and labor disruptions.

According to Efficio’s recent ‘Bridging the Gap’ research report, environmental sustainability is the second most important strategic initiative businesses are investing in – 47%. So while many businesses investigate their supplier diversification options and possibilities to better prepare for future disruptions, it is important to consider the environmental consequences. Transporting materials – whether by sea, land or air – contributes to global greenhouse gas emissions and impacts ecosystems worldwide.

Via-diversification can increase the environmental impact, HowAs ever, sourcing from suppliers closer to home can reduce shipping distances and impact on the environment. The environmental impact of provide shackles is extremely complex and requires careful consideration. Discover new, local, diverse provide partners can help meet on-demand requirements as external factors continue to exert global pressure provide shackles. When done well, invest in diversity provide facilities can contribute to improving and building resilience, better environmental, social and governance (ESG) outcomes, as well as innovative and more cost-effective approaches.

Countless opportunities

Large vendors often benefit from a broader worldwide reach, stronger reporting and infrastructure, and more experience in the market. When businesses diversify provide shackles, they often need to consider expanding their supply base to small and medium enterprises (SMEs). This can bring some real benefits in addition to obvious challenges. Small and medium businesses can often provide more innovative and effective services when they want to stand out from their competitors. They may be willing to work with you to come up with solutions tailored to your needs.

Many business leaders note that ongoing geopolitical issues are a key factor to continue provide chain problems, with others citing a lack of raw materials and high levels of inflation contributing to the problem. Invest in and use multiple suppliers – including those from traditional low-cost countries and local ones, from large, established businesses and innovative small businesses newer – will reduce these risks. It will also provide an opportunity to analyze the cost, location, and scope of supply among suppliers, and may encourage competition among suppliers to reduce prices. Businesses that prioritize supplier diversity have been found to spend 20% less on their purchasing activities.

While the benefits of diversifying your supplier base are becoming increasingly apparent, this strategy goes against the nature of so-called “normal” procurement. Buyers have traditionally focused on consolidating spending, so the idea of ​​splitting spending between external vendors (thus adding complexity), can feel counter-intuitive.

However, with the present provide chain problems are only set to continue, supplier diversification This is something every business needs to pay attention to. diversification can give businesses a provide chains are more able to absorb external shocks, by reducing their vulnerability to the shortages and setbacks that have plagued every industry over the past few years. Today, it is more important than ever to create a provide chain can weather economic pressures and disruptions. Flexibility means resilience in today’s volatile business landscape, and resilience will be the key to not only survival, but long-term success.


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