Three Tips for Diversifying and Strengthening Your Supply Chain - Part 1

The past 2 years have shown that relying on a single raw materials source is a recipe for disrupted supply chains and an inability to meet customer demand.  A robust supply chain is achieved not only by diversity, but also reliability and resilience.  An effective procurement and supply chain organization should be one that brings value to the overall organization, which is accomplished by having the right strategic and tactical approach.

We’ve outlined three actionable tips that can be used to consider how to build a more diverse and robust supply chain.

Identify The Opportunities

We like to follow Peter Drucker and say, “what gets measured gets managed.”  The best way to ensure a successful strategy is to have it be data driven.  Reliable data and a robust analysis will help you uncover what’s really driving your issues.

Conducting a detailed analysis to identify the opportunities that exist with your organization is critical to execution of any successful strategy.  Consider the following when trying to determine where to start:

• Classify your materials to determine how to approach your sourcing strategy. Accurate information and an understanding of your supplier base is critical.  This is typically a project led by procurement with the goal of creating a documented analysis to gain an understanding of your raw material base

  • Which materials are single sourced vs. multiple sourced?
  • Are your raw materials complex vs. commodities?
  • Which are your critical raw materials?
    • This serves as the data to drive your sourcing strategy. Identifying the importance, availability, and complexity of your raw materials will enable you to understand how to approach your supply base.
  • Conduct a spend analysis (raw materials + spend across suppliers)

• Identify areas for consolidation along with diversification

• Uncover opportunities for cost reductions

  • Ability to leverage spend across your company
  • Consolidation of suppliers could allow volume driven price reductions
  • Understand price movements across suppliers to prioritize mitigations

• Understand your total spend picture with all suppliers

  • Develop industry and supplier assessments for key raw materials
  • Anticipate industry changes
  • Establish and track expectations with key suppliers
  • Understand the quality and robustness of your master data
  • Is your current data and analysis an accurate view of your business?
  • Are you able to make informed decisions with your current data?
  • Analyze your key performance indicators (KPIs), including the accuracy of your demand forecasts

Our supply chain and operations advisors are experienced in many manufacturing and distribution companies. We help find the best way to optimize your supply chain management and get the results you want.