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The Role of Supply Chain Diversification in Today’s Landscape

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The recent pandemic has been a catalyst for the necessary metamorphosis of shippers, illustrating with swift clarity the processes within their operations that are easily disrupted by global and domestic influences. Whether these influences are natural disasters, political instability, trade disputes, or global pandemics, they have established that rigid supply chains would be ineffective in times of crisis.

Supply chain diversification has been utilized for years prior to the recent world events, but these diversifications have been isolated actions within logistics management, such as updating the supplier pool and establishing competition to generate cost savings. However, the meaning of supply chain diversification has also evolved from a focus on singular dependency to decreasing risk and costs, instead establishing flexibility within a supply chain through a multifaceted combination of supplier, vendor, and operational execution strategies.

The Importance of Supply Chain Diversification

Diversifying a logistics network is critical for supply chain health, but this does not require a complete overhaul of established partnerships in place today. With the collapse of the Soviet Union, countries isolated from the Western economy began to integrate with the global economy. Technology also began its accelerated growth, making global trade more accessible. Singular sourcing through global networks was reliant and cost-effective until it wasn’t.

The global trade bottleneck brought to the forefront the necessity of utilizing a network of suppliers as shipper operations were put on pause, awaiting inventory from overseas. These delays percolated down from supplier to end customer, all on the receiving end of disruptions beginning months and miles away. Despite this upset, the illuminated risk prompted companies to not only diversify their supplier network but also their product line, with new commodities accessible from a more localized region. The flexibility allowed these companies to remain successful when other shippers were failing to remain productive.

Building a More Complex and Agile Supply Chain

Though it is top of mind, supplier risk and diversifying the sourcing agencies and region are not the only avenues for operational agility. Vendor engagement can help initiate competition within a company’s solution, and product variation can reach a new customer demographic. However, regardless of ambitions, establishing more flexibility within a supply chain should begin with an assessment to illustrate vulnerabilities, not just within the supplier and vendor base, but also with operational gaps, and determine the risk in modifying any practices. Immediate savings should not negate core business operations or partnerships and could end up damaging established practices should another crisis materialize.

Like most policy changes, implementing a new process to replace a seasoned one is not simple, but technology and data analytics are becoming prerequisites for supply chain operations to add depth to the risks assessed and lend visibility to decision impacts, both hypothetical and executed, in real-time. This information analysis allows companies to operate deliberately, building a more resilient supply chain without large disruptions to their operational goals.

Harnessing Technology and Data Analytics

In addition to visibility, technology lends itself to establishing a more complex supply chain, allowing for the implementation of theoretical ideas into practical applications. While both technology and management of a more intricate logistics network can increase costs and investment initially, the cost savings and mitigated risk can optimize cost savings with more agile operations.

In an interconnected and volatile global marketplace, supply chain diversification is no longer a luxury but a necessity. Businesses that embrace diversification reap numerous benefits, including risk mitigation, enhanced resilience, better customer service, and increased regulatory compliance. By investing in diversifying their supply chains, companies position themselves for long-term success, ensuring continuity, adaptability, and the ability to seize opportunities in an ever-evolving business landscape.

Building a More Complex and Agile Supply Chain

Throughout the last decade, several new terms emerged around the lifecycle of the supply chain – blockchain, cloud, IoT, and AI. While always around, digitalization became a frequent turn of phrase among shippers and providers alike to align the need for efficient operations to a technology-led term.

At its core, digitalization is the adaptation of technology to execute and maintain a core business process. Aligning technology to operational and strategic goals allows for lower costs and less manual engagement, which in turn leads to minimized errors and more data-driven decision-making. 

With the supply chain gaps encountered during the pandemic, companies across the globe prioritized the visibility of the supply chain to continue to operate their business successfully. With the strive towards omniscient operations, companies sought digital resources to support that strategic vision. However, how a business adapted that technology was the true differentiator between the digital transformation of a company and technology-led operations support.   

How Digitalization is Utilized in Supply Chains

Successful companies use digital innovation, not as an aid to their operations, but as a fundamental pillar within their core values. These companies view technology, and the frequent evolution of its usage, as a requirement for driving growth within their business. From production and inventory management to delivery performance and product failures, all the way through predictive analytics and index trends – gainful technology allows for data collection, reporting, and root cause identification.

By engraining automation within operations, business owners utilize the accrued information for expedited, data-driven action. This allows operational flexibility for any obstructions to the business that occur. 

Digitalization for Shippers

Some shippers have a more rigid approach to supply chain disruptions due to less reliance on technology within their operations. These shippers can convert to a more digital business through identification, implementation, and integration: identification of the company’s strategic goals and the processes hindering the execution of that vision; implementation of the technology to drive those strategic initiatives; and integration of the company’s vision and foundational technology within the subprocesses and culture of the organization. 

Despite the acceleration of many companies to adopt a more tech-focused approach to operations, the digital transformation of a company is not as simple as purchasing the latest technology to automate a process. The true transformation is the alignment of operational technology to the company’s strategic goals and the use of data to remain agile when faced with disruptions to that vision. 

The Benefits of Digitalization

As more and more companies strive towards digitalization, it is important to prioritize how data innovation lends to a business’s growth. While data analytics allows for more informed and lower-risk decision-making, automating the entirety of a process can eliminate in-house expertise and risk service failures if the operational technology fails. Maintaining a balance between modernizing business practices through technology and implementing every novelty technology that comes into the market is key to longevity within the business’s market. 

Heading into 2023, the term digitalization will transform from an industry buzzword to a standard practice for any company operating within the global supply chain. Increasing the fundamental involvement of technology in the business will allow companies to adapt to this changing landscape and will ensure businesses stay ahead as interconnectivity between companies continues evolving.

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Supply Chain Diversification, The Role of Supply Chain Diversification in Today’s Landscape

By Sarah Decker

Director of Managed Transportation  

“Cultivating partnerships has always been a cornerstone of Rockfarm’s business model.  Throughout our growth, we continually focused development on teams built to foster and support client relationships.  From tactical control tower services to strategic account management, we position our partnership with shippers and brokers alike as an extension of their teams; marrying our clients’ own internal initiatives with Rockfarm’s logistics expertise to promote aligned solutions prioritized on growth and lowering our client’s cost to serve.”


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