Supply chain diversity is still a tried-and-true tactic in today's volatile environment. An efficient risk management strategy is not only advantageous, but also essential in the face of rising expenses, a lack of drivers, and demand shocks. 59% of companies have implemented new risk management strategies in the past 12 months. Many businesses are moving away from supplier consolidation and single-source sourcing and starting to diversify their supply chains. With the flexibility and agility to create resilient supply networks, this strategy confronts local and global uncertainty head-on. In this article let us read about navigating supply chain disruptions with diversification.

Expanding Supply networks mitigates risk

There have been substantial material shortages and manufacturing delays in economies all over the world in recent years. COVID-19 caused China to close several of its facilities at the beginning of 2020, leaving thousands of businesses with unfilled orders. As the pandemic moved further west, companies in Europe and the United States resumed regular operations. Existing problems were made worse by  blockage of the Suez Canal, which resulted in daily delays of roughly $10 billion worth of commodities.

Low-cost labor and production may lead to immediate cost reductions, but many overlook long-term risk. How can companies prevent unplanned catastrophes? It's crucial to diversify supplier networks by relying on a variety of vendors rather than a single centralized source. Businesses can prevent significant production and manufacturing delays by setting up various regional supply chains.

The right diversification strategies pay dividends

Using a transportation management system (TMS) can assist companies in accelerating their diversification. TMS technologies enable firms to optimize procurement, transportation, and expenses by giving real-time visibility into the movement of raw materials and finished items. By offering data-driven supplier suggestions, this technology streamlines sourcing thanks to a consolidated, user-friendly interface. The outcome? Diversifying their supply base allows businesses to reduce risk without sacrificing cost-effectiveness or changing their regular business processes.

Businesses can further hone their regional benefits and disadvantages diversification plans by taking these into account. Moving production and operations to a neighboring nation, or "nearshoring," may be advantageous, particularly for businesses whose final market is located in or close to the region in question.

Leveraging Technology to achieve diversification

Supply chain diversification is now much simpler for firms to execute and reap the benefits of digitalization. Businesses are much better equipped to monitor their supply chains in real time and foresee impending issues as a result of the openness that digitalization makes possible. Businesses that have already achieved diversification are better equipped to decide which alternatives to pursue first and when, as well as when to start using them.

Supply Chain as a Service (SCaaS) is a technical advancement that aims to greatly improve supply chain flexibility and enable unheard-of diversification. In general, SCaaS platforms give consumers access to tested supply chain solutions that can be used as needed to enhance a business' in-house logistics. This allows organizations to outsource specific parts of their supply chain as needed. Additionally, SCaaS greatly improves visibility and transparency throughout the supply chain because it is cloud-based, enabling companies to respond to disruptions with a higher level of efficiency. By offering a large range of screened suppliers with locations all over the world, SCaaS also enables organizations to add diversification to their supply chains. By swiftly switching to a provider in another region, SCaaS makes sure that a supply chain gap caused by a disruption in one region may be promptly closed.

By automating the procedure for supply chain scaling, SCaaS also assists companies in achieving and maintaining supply chain diversification. The logistics of ramping up production in a new facility can result in expensive delays when disturbances call for a switch to a different source. Similar to this, disruptions that force volume reductions can lead to expensive waste if supply networks take a while to adjust. With the variety of solutions offered by SCaaS, these problems can be resolved with little loss of productivity for the company. Businesses must find ways to become more flexible if they want to continue to be successful in the face of the supply chain environment's constant unpredictability. Thanks to advancements made possible by digitization, supply chain diversification is a feasible and accessible choice for an increasing number of enterprises.

The main goal of supply chain diversity is to give companies more supply chain options. Businesses frequently consolidate suppliers in order to streamline logistics and benefit from economies of scale. One system equals one point of failure, which is a drawback of such strategy. Businesses may be left with little choice but to wait for the problems causing the delay to be remedied if anything prevents that supplier from delivering as promised. However, concentrating only on having several options will not always help to lower the business risks connected to supply chain failures. Businesses must use a variety of choices that react differently to the problems that threaten to cause disruptions if they are to fully benefit from supply chain diversification.