Supply chain diversification allows a young woman to review a list of potential suppliers ahead of expected disruptions.
Author

Fabiola Negron

Director of Food Safety

4 Reasons Why You Need Supply Chain Diversification

Jul 17, 2023

Supply chain diversification is a powerful strategy for any importer. Whether you want to navigate a vendor’s increasing costs, avoid disruptions, or change suppliers when one goes out of compliance, the ability to pivot with your suppliers is a game changer.   

Diversifying your supply chain isn’t about making vendors compete with each other for the best price. It’s about preparing your supply chain to be as flexible as possible in the face of various and significant pressures in the global marketplace. 

Not only does supplier diversification safeguard your bottom line, but also having a network of exporters at your fingertips always makes for smooth sailing on international trade waters, especially for FSVP Importers. 

What Is Supply Chain Diversification? 

Not to be confused with supplier diversity — an effective social business strategy that boosts inclusivity in vendor sourcing — supply chain diversification speaks to the development of flexibility among your vendors in order to optimize risk management and agility. It’s about increasing your options and assuring your product always reaches the market regardless of potential disruptions.  

Diversification as the Cure for Supply Chain Disruptions 

When importers begin diversifying their supply chain, they become  better equiped to navigate critical disruptions that can cripple their revenue compared to less flexible importers that lean only on one or two international exporters.  

Simply put, when importers neglect diversification, they set themselves up for failure when global supply chain issues strike.  

When you pursue diversification, you build supply chain resilience. Your business goes from having a single vendor to multiple suppliers you can rotate as needed.  

Here are four examples of how supply chain diversification can benefit your business:

1. Pivot Out of Compliance Suppliers

The last thing an importer wants is to have product sitting in detention due to lack of supplier compliance.  

When you take your supply chain and infuse a bit of flexibility into it, you can easily pivot suppliers when one falls out of compliance. You can readily make the call and place an order with an alternate source at a moment’s notice and assure your supply chain is healthy and mitigate the risk of FDA detentions.

2. Navigate Geopolitical Constraints

Remember the infamous Suez Canal debacle? What about the Sino-American Trade War during the Trump Administration? If those incidents taught us anything, it’s when your supply chain is tied up in only one or two suppliers then you stand to lose a lot of revenue — or worse, your whole business.  

When you introduce diversification into your supply chain management, you can sidestep global gridlocks and political tariffs on your trade deals. 

3. Avoid Rising Supplier Costs

On the subject of gridlocks and tariffs, these, and other reasons like them, often lead to price increases in the market.  

Suppliers raise costs, and the importers who aren’t as flexible are stuck paying higher costs. They have to choose between a lower profit or contribution to the inflation machine.  

Supply chain diversification opens up cost options that would have previously been unavailable. It allows your business to evaluate supply costs, shipment times, and adjust quickly and efficiently.

4. Stay Ahead of Competitors

Diversifying your supply chain also has the added benefit of beating out competitors that have yet to adopt a more flexible approach to sourcing suppliers. Whereas they might be stuck paying higher costs on a shipment that’s also locked in detention, you’re able to source lower costs and keep product flowing uninterrupted.  

Gain deeper insights into the health and purchasing power of your entire supply chain with ComplyHub™. 

Supply Chain Diversification Risks 

Managing a few suppliers is one thing, trying to self-manage a wider supply network of alternate suppliers for each product is another.  

It’s true that the more choices you have, the less vulnerable your business is to disruptions.  

However, diversification can also increase your risk unless it’s effectively managed as the more suppliers you have adds greater opportunities for something to go awry.  

So, how do you mitigate the risk that diversification imposes?  

One simple and effective way is to utilize technology that offers in depth and on demand insights on potential suppliers before you even onboard them. When you can look at a supplier’s history at a glance, you can source the best suppliers for your diversification strategy.  

Leveraging Technology For Supply Chain Diversification 

Registrar Corp’s ComplyHub software enables U.S. importers to source over 150,000 active food and beverage suppliers worldwide.   

By leveraging ComplyHub’s functionality and never-before-seen supplier data, importers are empowered to see how your suppliers rank against top global suppliers and help you instantly find qualified suppliers across 150+ countries so you know exactly who you should partner with.

Our algorithm instantly scores hundreds of thousands of suppliers based on their compliance and shipment history so you can make decisions quickly and easily.

Don’t get caught in easily avoidable disruptions. Discover how ComplyHub can revolutionize your supply chain management, today.

Author


Fabiola Negron

Director of Food Safety

Widely respected in the Food Safety industry, Fabiola provides insightful education to food and beverage companies worldwide on U.S. FDA regulations resulting from the passage of the Food Safety Modernization Act (FSMA) in 2011. Her expertise in creating and reviewing Food Safety plans, helping U.S. importers comply with Foreign Supplier Verification Program (FSVP) regulations, and leading our Food Safety team have helped hundreds of companies comply with FDA food and beverage requirements.

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