As a business owner, entrepreneur, or ecommerce seller, you know how important it is to maintain a reliable supply chain. But what happens when that chain is disrupted? Here's why diversifying your supply chain is essential for business success.

Benefits of increasing supplier diversity

Diversifying your supply chain means working with multiple suppliers, rather than relying on a single source. This has a number of benefits.

• Reduced risk: Lower the chance of disruptions from things like natural disasters, political issues, or supply chain problems. This improve your supply chain resilience.
• Increased flexibility: Working with multiple suppliers gives you greater flexibility to adjust to changes in demand, quality, or pricing.
• Cost savings: You can negotiate better pricing and terms with multiple suppliers, which can help you save costs.
• Competitive advantage: You may gain a competitive advantage by providing access to new markets, products, or technologies.

Risks of expanding your sourcing channels

While increasing your supplier base can bring many benefits, there are also risks to consider. These include:

• Increased complexity: Working with multiple suppliers can increase the complexity of managing your supply chain and require additional resources and expertise.
• Quality control: When you’re managing multiple suppliers, it can become more difficult to maintain consistent quality standards across your products.
• Communication challenges: Working with multiple suppliers, especially those in different countries or time zones, can make communication more difficult. There might be language barriers and delays in response due to the time difference.
• Cost: Diversifying your supply chain could end up increasing costs. You may need to invest in additional technology, staff, or resources to manage multiple suppliers.

How to minimise the risks

Establishing robust procedures and systems is necessary for businesses to manage a complex supply chain with multiple suppliers. This includes in areas such as communication, inventory management, quality control, logistics, and compliance. It could mean that you implement technology solutions, such as supply chain management software, and establishing clear protocols and guidelines for supplier relationships. It may also involve investing in training and development programs for staff to build expertise in supply chain management.

To minimise the risks associated with new suppliers, there are several tactics you can employ:

Develop a clear sourcing strategy: Consider your business goals, budget, and quality standards before searching for new suppliers.

Vet suppliers thoroughly: Thoroughly qualify suppliers before signing a contract to ensure they meet your quality, reliability, and compliance standards. Platforms such as Alibaba.com offer Trade Assurance for peace of mind. Meanwhile, 1688.com, China's largest B2B marketplace, shows supplier information, including years in operation, response rate, return rate, and transaction history over the past 90 days.

Build strong relationships: Building strong relationships with suppliers can help minimise the risks associated with communication challenges, quality control, and cost.

Use technology: Technology can simplify a diversified supply chain by automating data collection and analysis, while also providing real-time visibility into supplier performance. Supply Chain Management (SCM) software for example, tracks inventory, manages supplier relationships and optimises logistics. Some popular examples include SAP, Oracle, and Microsoft Dynamics. You should ensure these technology solutions integrate with existing systems and can be easy for staff to use.