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Diversifying Your Supply Chain

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For companies in a time of extreme growth, focusing on what you’re offering your customers is a must. Unfortunately, most companies can’t spend all their time focusing on logistics, which can create an issue where it starts to drain your team’s resources.

For business owners who operate online, you might not have the option of storing your stock in a physical company-owned location. This means having a grasp on the logistics of how e-commerce orders are packed, picked, and shipped to whoever buys them.

When you’re working with modern consumers, everything about your experience needs to be seamless and quick. One out of three of your customers will consider moving to a competitor if they have a single bad experience.

This leaves you to determine how to offer the best experience as your brand grows. One of the best options you have is supply chain diversification.

What Supply Chain Diversification Means

Supply chain diversification is a modern strategy where a retailer or manufacturing business broadens the number of suppliers they work with. This creates more choices for the customers and a better supply for your brand.

When you have access to additional suppliers, you can be more flexible and ready to take on a changing market.

The most common variables used to decide on the right suppliers are cost and time. You’ll likely find that one is more important to you than the other.


For example, if one supplier offers you a paperweight that costs $2 and has a two-week delivery time and another offers them for $5 but can get them to you in five days, you’ll make a choice based on speed versus cost.

At the same time, while you might value speed over time or vice versa at one time, this can change based on external and internal reasons.

This might mean that the materials costs associated with the paperweight rise or you take on a new business strategy that changes the way you do business.

So, you might have chosen the first supplier initially but then find that the second supplier is a better choice down the road. You could choose to work with both of them to have the ability to quickly adapt whenever needed.

Why Supply Chain Diversification Is Essential

There are a variety of reasons to choose supply chain diversification on both an economic and organizational level. However, these largely connect to four reasons listed below:

  • Potential for cost savings – Research shows that having several suppliers can cut down on costs. One survey from 2015 shows that supplier diversity can add over $3.6 million to the bottom line for every $1 million in procurement operation costs. However, it also doesn’t hold that the biggest suppliers will be the most inexpensive. Sometimes another company does better due to specialization.
  • Access to creative thinking and innovation – Working with a supplier isn’t a simple equation where a business makes an order and the supplier provides it. However, working with several suppliers gives you access to smart people outside your own business who can create innovation and share creative ideas.
  • Diverse cultures drive better approaches – When you have a diverse base of suppliers, you’ll often be a better reflection of the customers you have. For instance, broadening your geographical suppliers might let you offer better prices at a local level. In addition, small and medium-sized suppliers may be flexible and better attuned to customers.
  • Quality and commitment to service – A diverse supply chain lets you be more flexible, which you saw when looking at speed versus cost. However, there are other choices that a larger supply chain can assist with. Being flexible lets you respond to changes in the market and nuances in customer demand while providing a high level of service.

How to Diversify Your Supply Chain

The process of diversifying your supply chain can be challenging, but there aren’t many tricks to it. The main thing that needs to occur is a mindset change. If you start thinking about your suppliers as customers, that can help. Make sure you ask them tons of questions and make it simple for them to work with you.

Next, build a strategy that you can manage well. It should have specific processes related to educating and assisting suppliers throughout the process. You’ll also have suppliers you’ve worked with in the past and want to continue to work with who need to be included in the plan. This is especially important if they will remain important suppliers down the line.

Creating and improving your supplier base can be challenging, but there are several ways you can help yourself. Network with trade bodies and organizations representing certain sectors in the industry, such as small businesses or women-owned business groups.

You can also add information about your supplier diversification efforts on your website. Create a web form so people and organizations can easily get in touch with you.

No matter how you handle the sourcing of suppliers, you need to be sure you standardize your paperwork and processes. Having an excellent paper trail is a legal need for any company that seeks out diversification.

Even without the reputational and social benefits provided by diversification and the potential for an increased ROI, cost savings, and efficiency, having a diverse supply chain just makes good sense. It can offer a lot to your business, no matter what you offer to your customers.

It’s a good idea to diversify your supply chain in any instance where it is possible. Things like issues with your major supply chain provider or employees striking at a logistics provider can create issues faster than you might expect.

When you can’t get your orders out, the results can be devastating. You need options so you never end up in a situation like that.

When you have a large number of suppliers available, you can save money, enhance your reputation, open up to greater innovation, and offer better service. It’s a resilient and adaptable business model that will inevitably benefit both you and your customers.

Contact us for detailed information on our consulting services, and support you in diversifying your supply chain strategy