10.02.2021  |  Sourcing

The potential of multisourcing

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Progressively leaner supply chains have sped production and have optimized delivery costs worldwide, but they have revealed their heightened vulnerability in the face of unpredictable forces. Sourcing from multiple suppliers along a supply chain, from raw materials to last-mile delivery, can effectively mitigate risk by adding flexibility and build competiveness for logistics players on the global stage.

Key Developments & Implications

The practice of multisourcing is increasingly attractive to logistics players as force majeure events, including unexpected trade tariffs, hurricanes, labor strikes, and pandemics, appear to be on the rise. Repeated, unpredictable supply chain disruptions have challenged the notion of a stable, traditional global supply chain. Where primarily manufacturing jobs were offshored from established economic powerhouses to nations with cheaper labor as an economic decision, this pattern is slowly transforming to a more complicated web, with goods and services no longer exclusively coming from the “usual” countries.

There are many factors that enable logistics companies to more feasibly pursue multisourcing, such as improved performance and costs in Automation and computing along with rising labour costs in previously cheaper regions resulting in production becoming more expensive. Additionally, governments globally are playing a more active role in luring foreign companies and investment while promoting domestic entrepreneurialism and healthy competition. Regardless of enabling factors, the primary motivation for logistics players in seeking multisourcing is to increase the resilience and flexibility of the supply chain. 

Supply chain resilience

Supply chain resilience is front of mind for every company manufacturing at scale, impacting sourcing, inventory, management, and logistics processes. Barring the effects of the COVID-19 pandemic, manufacturers have been forced to reconsider existing operations and to diversify supply chains because of new trade agreements, such as USMCA and Brexit-related trade negotiations. By investing in resilient global networks, assessing existing supply chains, and evaluating redundancy measures, companies can minimize vulnerability to trade regulations and tensions. Given the maturity of current supply chains, however, larger manufacturers are much more likely to supplement rather than replace existing production with additional facilities and supplier relationships.

As more manufacturers geo-diversify their supply chains, logistics providers are expected to follow and respond to the resulting changing needs of manufacturers. New warehousing and service facilities must be built as production hubs grow across the globe, and new laws and cultural differences must be steadily navigated to ensure smooth-running supply chains. DHL takes part with an additional unique service in the form of Resilience360, a risk management platform for customers that predicts, assesses, and mitigates the risk of supply chain disruptions around the world.

Supplier diversity programs 

Supplier diversity programs are taking prominence among industry players as they provide numerous benefits. Governments, nonprofits, and companies have instituted programs globally to promote business with diverse suppliers, which are defined as either small businesses or those that are at least 51% owned and operated by members of an under-represented or under-served group like minorities, women, veterans, and the LGBTQ+ community. Research shows that supplier diversity initiatives are more than simply “feel good” options and can actually save millions of dollars for buyers across industries through increase in competition for contracts and bids. In the logistics industry, supplier diversity programs exist and are likely to be further promoted throughout the supply chain, from fulfillment solutions to digital marketplaces, lowering costs and advancing social responsibility in the communities served.

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