Strategy No. 3: Multisourcing
In 2011, major natural disasters in Japan and Thailand disrupted supply chains across the world and exposed companies’ reliance on single sources of supply. In the automotive industry, nearly finished cars could not be shipped to customers because of missing, and often inexpensive, components. Multisourcing is an obvious way to mitigate this risk.
To craft a multisourcing strategy, supply chain leaders must know their supplier networks in detail and be able to categorize suppliers not just by spend, but also by revenue impact if a disruptive event occurs. Diversification can be achieved by awarding business to additional suppliers or working with an existing single- or sole-source supplier that is able to produce out of several locations.
Strategy No. 4: Nearshoring
Beyond multisourcing, some companies want to reduce geographic dependence in their global networks and shorten cycle times for finished products. Regional or local supply chains can be more expensive because they add more players and complexity to the ecosystem, but they allow for more control over inventory and move the product closer to the end consumer.
Strategy No. 5: Platform, product or plant harmonization
The more regionalized the network, the more harmonized plant technology has to be to allow products to move seamlessly across the network. The use of common vehicle platforms for a variety of models in the automotive industry is one well-established example of such harmonization.
Standardizing components across multiple products — particularly those that are not visible or important to the customer — is another form of harmonization. This simplifies sourcing policies and creates opportunities to place higher volumes among multiple suppliers, which in turn enhances resiliency.
Strategy No. 6: Ecosystem partnerships
The COVID-19 crisis has shown the need to have a diversified approach to sourcing. At the same time, however, collaboration with strategic raw material suppliers and external service partners is also vital to ensure better preparedness and resilience for the future. For companies without the scale to support multiple locations on their own, strong relationships with contract manufacturers and global 3PLs can be vital in diversifying production and distribution to different countries.
Gartner survey data shows that around half of supply chain organizations are either using external manufacturers or exploring how they can support product moves, with a similar proportion engaging logistics partners for this purpose.
The original article by Geraint John, vice president analyst at Gartner, is here.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Photo credit: iStockphoto/IPGGutenbergUKLtd
