Factors to Consider When Increasing Flexibility with Supply Chain Diversification
One of the core values of American Freight Service is flexibility. This is because we know from experience that even the best laid plans will go awry from time to time, and the best way to get them back on track is by building in room for flexibility. Supply chain diversification is one way you can plan for flexibility in advance, but it isn’t particularly simple. Here are four factors that must be considered during the diversification process to ensure you’re keeping your focus in the right place while making concessions for flexibility as needed:
Partner Capabilities
While you are prepared to build up a diversified supply chain with more options in case of a roadblock, understand the possibility that your supply chain partners may not be capable of providing service in every direction your organization needs. You’ll need to know the capabilities of the players on your team before you can build a diversified supply chain. This way, you can identify new opportunities to add in additional partners that can help with any gaps you find. Locking in a variety of service providers will keep you prepared before and during challenges. For example, you could work with a lumping service provider to help bolster your team in times of high volume.
Additional Benefits
When searching for new partners, you’ll most likely have an idea of what you’re looking for. Ability to provide the service that you’re looking for is the first checkbox you’ll need to hit, but what else could you be gaining from a partnership? Logistics providers often offer a list of value-add services that can bolster your business in ways beyond their primary business. Choosing a warehouse with built-in benefits can accomplish your storage needs, while also delivering on quality through product adjustments like kitting, repackaging and palletizing. While some tasks may require a large company with wide reach for international capabilities, others will yield more success with smaller, centrally located providers for efficiency. Developing a strong network of partners with individual strengths can help safeguard your business through any challenge.
Risk Appetite
Having an idea of your company’s risk tolerance can help you determine potential avenues for supply chain diversification and limit those that aren’t appropriate. For some supply chains, implementing just in time manufacturing processes can be a high risk endeavor because they have highly variable customer demand. For other businesses, this is a great way to reduce warehousing costs by implementing options like crossdocking services and sending product to the customer without a need for long term storage. Each business’ risk tolerance is going to be unique to its circumstances, but having a clear assessment of them will allow you peace of mind.
Potential Trade-Offs
Though every decision made during supply chain diversification will afford your business many new opportunities and flexibility, each choice is likely to come with a limiting factor as well. Finding a partner that offers rework services can give you access to new product configurations to provide custom solutions or create quick options to refurbish damaged product. However, these services have potential to elongate shipping times and increase staffing costs that your business isn’t currently equipped for. A valuable, long-term solution may cost you short-term savings, so having a clear understanding of the trade-offs for any situation will help you prepare for them in advance.
Contingency planning for a supply chain is hugely beneficial and allows for seamless transitions in the face of unprecedented obstacles. But it can be very difficult! Considering the abilities of your supply chain partners, added value, risk tolerance, and potential trade-offs in advance can help you build a diversified supply chain that works for your business efficiently. To learn more about how you can build a more flexible supply chain, reach out to our team.