Spread the bets
A resilient supply chain is one that’s both diverse and sustainable. One that can flex when stressed, is not disrupted by geopolitical, meteorological, health, or economic shocks, and is secure for the long term.
To successfully apply this equation relies on understanding exactly where your suppliers are, and what they supply. Multi-tier mapping of suppliers and reviewing supplier sourcing approaches for critical parts are fundamental to resilient supply chains — it’s often the delay to deliveries of small but crucial components that can halt production.
Economic nationalism increasingly impacts supply chains, and as a result many organizations are looking to localize or nearshore their suppliers. A "glocalization" approach, driven by the pandemic and sharp changes in global trade policies, focuses on balancing localized and globalized business options to stay competitive.
This may require looking to suppliers that the organization hasn’t dealt with before. Use of diverse suppliers, given their vast and unique footprint can contribute to building resiliency, better environmental, social and governance (ESG) outcomes — and more cost-effective and innovative approaches.
Diverse suppliers can help cut costs and drive innovation
What are the advantages in continuing to use incumbent suppliers? They may be reliably low-cost. They’re familiar. They require little new effort to engage with. But are they agile? Are they fit for a future that is more unpredictable and unstable than ever before? Are they ready to embrace change to the extent that your organization may want to — or be forced to? Are your longest-standing suppliers also your riskiest?
Exploring new diverse suppliers could help your supply chain be more agile too. Their product or service may be more innovative — as your supply chain strategy changes, you may find diverse suppliers are more open to proofs of concept. Another advantage is that diverse suppliers tend to be more localized to your manufacturing and distribution sites, which in turn has a ripple effect of helping local businesses buy the goods and services they need to sustain their own operations.
Closer-to-home diverse suppliers also could be nimbler in helping meet on-demand requirements as global supply chains crack under pressure. And they may be better placed to respond to market trends and help you be more innovative too — their fresher view and brighter outlook could equate to being more willing and able to try new approaches than your incumbent suppliers.
Companies that are consistently ranked by analysts as top global supply chains add diverse companies to their supply base. For example, since 2008, P&G has spent more than $2 billion with diverse-owned businesses globally every year, and the company is well on its way to spending $3 billion by 2030.1 And Cisco Systems plans to commit $50 million over five years to increase the diversity of its partner ecosystem.2