The first step is to conduct a risk assessment by mapping out your supply chain, end-to-end, to identify where vulnerability and weak points may be hidden. Determine how easy it would be to replace or substitute a supplier, the cost and revenue impact of doing so and how that could affect your profit margin. Based on this analysis, develop a proactive plan so that you can act quickly if disruption occurs. Risk management should be an ongoing process, and assessments should be conducted regularly.
Companies also may consider moving to a more regional model, where raw materials sourcing, processing and manufacturing all occur within one area of the world or country, as opposed to multiple locations. With a regional approach, you reduce the chance for disruption by moving your suppliers, materials and logistics closer to your business and, ultimately, your customers. In addition to saving time, reducing costs and minimizing risks with shorter transportation routes, the quality of goods often improves.
Diversify your customer base and revenue streams.
With excess cash and liquidity in the market and interest rates that are expected to stay low through the remainder of 2021, now could be an opportune time to consider mergers and acquisitions (M&A). In this environment, M&A could be a more cost-effective way to expand into a new global market, add a new capability or product or invest in needed technology — so that you can expand your customer base, add a new revenue stream and accelerate growth.
Diversify your service model through digitization.
In addition to an improved customer experience, digitization and process improvement can lessen the cost of diversification and reduce supply chain risk. Businesses that want to invest in digital capabilities or e-commerce should focus on people, systems and security:
