Diversifying suppliers is a new trend that African supply chains are beginning to pick up, especially after COVID-19. This approach ensures the supply chains can build a stable operation.
Suppliers are businesses that provide goods and services for any supply chain. These suppliers can also help the supply chain manage one or more processes they have expertise in. A very good example of this is in the logistics and transportation department.
The question is why these supply chains are exploring the multiple suppliers approach. Let’s explore some answers.
1. To Build Resilience
Resilience is the supply chain’s ability to withstand disruptions, no matter how grievous it may seem. Diversifying its suppliers is one of the ways to achieve this effectively.
Think about a supply chain solely relying on global suppliers for its raw materials. What happens when there is theft of its goods while en route? Insurance might cover it, but the goods will not get to that supply chain on time.
It doesn’t have to be so extreme, but the point remains. That supply chain is definitely in trouble.
On the other hand, if the same supply chain had a local partner who could bridge that gap and allow the supply to meet its obligations, it could do a lot to sustain that supply chain.
African supply chains seek to ensure more seamless operations, and strengthening their supplier base is an efficient way to achieve that.
2. As a Cost Cutting Strategy
Diversifying suppliers is a reliable method of cutting the cost of any supply chain. It helps provide the supply chain with multiple options for better negotiation leverage. However, having too many suppliers has its pros and cons.
These pros and cons can make settling with any sourcing strategy challenging for African supply chains. They often depend on more than one to milk one strategy while using the other(s) to counteract its cons.
Again, let’s look at the local and global suppliers. Global suppliers tend to be cheaper, but it can take too long. A local supplier, on the other hand, will often be more expensive. However, it can help the supply chain stay steady when the lead time is too long.
But there is a caveat. Though the presence of too many suppliers can help them get a good price, it is not a good strategy for utilizing economies of scale. It is important that they thread carefully to maximize every opportunity.
3. Sparks Innovation
African supply chains, in a bid to engineer innovation along every inch of the operation, are collaborating with more suppliers. This is because supply chains tend to be limited when they are stuck doing the same thing repeatedly.
Diversifying their suppliers offers these supply chains a fresh perspective, especially when the suppliers are market leaders and experts. Innovation here can be developed in the product or supply chain processes.
By partnering with multiple experts, supply chains in Africa are seizing opportunities to learn how best to run their operations from these suppliers.
4. Agile Response to Changes
In the face of market volatility and political instability in many African countries, the supply chains are trying to protect themselves. Diversifying its suppliers will strengthen their access to raw materials and to their customers. When one fails, another may be able to help them.
The trick is maintaining all of them when everything is fine. To do that, these supply chains are finding innovative approaches to supplier relationships where everyone can eat.
They are also eager to open up or experiment with new businesses with these suppliers, relying heavily on their expertise.
Obinabo Tochukwu Tabansi is a supply chain mastro and writer with a decade of experience working in different facets of the supply chain. Today he is living his passion for writing on all things supply chain. His blog, Supply Chain Nuggets, is Africa’s fastest-rising supply chain blog, helping professionals, business owners, and curious minds navigate the supply chain complexities on the continent.
