Why supplier diversification is no longer optional: Lessons from recent supply chain disruptions

Global supply chains have faced unprecedented disruptions in recent years, slinging the concept of supply chain resilience into the limelight — and proving that disruption is now the norm, rather than an exception. 

From the COVID-19 pandemic and port strikes to natural disasters and geopolitical tensions, global disruptions have served as a wake-up call exposing the vulnerabilities of relying on a single supplier or a narrow supply base. 

Whether it’s manufacturing delays, cost fluctuations, or product shortages, over-reliance on a limited number of suppliers has proven to be a significant liability — and for many brands, such risks are no longer theoretical but real and costly.

As cost and margin pressures start to pull efficiency back into sharper focus, more and more brands are learning first-hand that the scales of supply chain performance versus cost can only be balanced by restructuring their supply chain. 

And with new tariffs poised to set off another seismic shift in the trade landscape this year, there’s even more reason to double down on maintaining healthy margins and reducing exposure to global disruptions. 

On that front, supplier diversification is mission critical.

Why supplier diversification is no longer optional

The idea is simple: don’t put all your eggs in one basket. A diversified supplier network helps mitigate risks, maintain operational continuity, and reduce the impact of external shocks. However, it’s not just about adding more suppliers — it’s about working with a strategic mix of reputable, pre-vetted suppliers who can deliver consistent quality, meet deadlines, and provide flexibility in times of crisis.

In this article, we’ll explore how recent global disruptions have underscored the necessity of supplier diversification, the steps brands can take to diversify their vendor network — and even unlock a competitive edge by working with trusted, pre-vetted suppliers to enhance both efficiency and quality.

The cost of sole sourcing: Real-world examples from recent disruptions

Sole sourcing — the practice of relying on a single supplier for a critical component or product — has long served as a strategy to reduce costs and simplify operations. However, recent global disruptions have shown that this approach comes with significant risks. 

Take, for example, the semiconductor shortage that followed the COVID-19 pandemic. Industries ranging from automotive to consumer electronics were hit hard when production facilities in Asia, particularly Taiwan, faced lockdowns and shutdowns. Companies that depended heavily on a single supplier for chips found themselves unable to meet demand, leading to production delays and revenue loss.

Similarly, when the Suez Canal was blocked by the Ever Given in 2021, the ripple effects were felt across the globe. Companies that depended on a single shipping route or port for their goods were severely impacted, facing delayed shipments, increased shipping costs, and inventory shortages. In industries such as fashion, where just-in-time inventory practices are common, the consequences were especially harsh — with brands unable to restock key items in time for peak selling seasons.

These disruptions highlighted a fundamental flaw in sole sourcing strategies: they expose businesses to systemic risks — because when one link in the chain breaks, the entire operation can come to a halt. 

The antidote is a supplier diversification strategy that not only offers brands a lifeline when disruptions inevitably creep up, but also improves the overall resilience and cost efficiency of the supply chain. 

On that front, it’s all about reducing the risk of a single point of failure. 

An opportunity to mitigate geopolitical and economic risks with supplier diversification 

Beyond one-off incidents, the global marketplace is also increasingly affected by ongoing geopolitical tensions, trade wars, and economic fluctuations. As we saw during the U.S.-China trade war, tariffs and regulatory changes can quickly affect the cost and availability of products, especially for businesses that rely heavily on sourcing from a single country. 

But that’s not the only economic conflict setting off a far-reaching ripple effect of supply chain issues — the ongoing geopolitical instability in regions like Eastern Europe and Southeast Asia have also further exacerbated the risks for brands who rely on a concentrated supply base.

Supplier diversification mitigates these risks by spreading procurement across multiple regions or countries — in other words, giving brands more baskets in which to put their eggs — to reduce the impact of political instability or trade restrictions in any one area. For instance, a company that sources products from both China and Mexico, as opposed to just China, can better adapt to changes in tariffs or trade policies that might disproportionately affect one country’s exports.

On top of reducing geopolitical risks, supplier diversification can also be a boon for brands navigating economic volatility. During times of inflation or currency devaluation in a particular region, businesses with a more diversified supplier network can adjust to pricing fluctuations without significant disruptions to their margins or operations. For example, if raw material costs surge in one country due to inflation, a business with access to suppliers in other regions can negotiate better terms or shift procurement strategies without facing massive cost increases.

The takeaway is that supplier diversification gives brands more than a passive safety net — it can also be a proactive strategy for managing geopolitical and economic risks, empowering brands to stay agile and respond accordingly no matter what challenges they face.

But how can brands go about shifting the paradigm?

Steps to implement a supplier diversification strategy

The right approach to supplier diversification will look different for each brand. Done right, it should be informed by thoughtful planning, data-driven decisions, and thorough supplier evaluations. Here are some recommended steps brands should take to get started: 

  1. Assess current supply chain dependencies

The first step is to map out your existing supply chain and identify where you are most vulnerable. Look for areas where you rely on a single supplier, a single geographic region, or a single manufacturing facility. These are the areas that pose the greatest risk.

  1. Identify alternative suppliers

Once you’ve assessed your current dependencies, the next step is to identify and evaluate potential alternative suppliers. This doesn’t mean simply adding more suppliers to the mix — it means strategically selecting suppliers from diverse regions or industries who can meet your quality standards, price points, and production timelines. 

Anvyl’s Marketplace is a sourcing service that provides brands with a shortlist of suppliers and quotes to help them quickly identify alternative strategies.
Learn More
  1. Evaluate supplier reliability

Supplier diversification doesn’t work if you partner with unreliable vendors. It’s crucial to conduct thorough due diligence when selecting new suppliers, ensuring that they have the capacity, reputation, and financial stability to meet your long-term needs. 

There are powerful tools out there to help. Anvyl’s platform provides supplier performance tools, making it easy to establish processes for supplier audits, scorecards, and continuous performance monitoring to measure supplier reliability over time.

  1. Establish strong relationships

Building relationships with multiple suppliers can be more complex than working with a single source, but it’s worth the investment. Engage with potential suppliers early, negotiate favorable terms, set up quarterly business reviews, and establish clear communication channels to ensure smooth collaboration. It’s also important to maintain a balance in your supplier portfolio, ensuring that no one supplier dominates your operations.

  1. Integrate technology for visibility

Managing a diversified supply chain can be complex, but adopting technology like an intelligent purchase order management system can make it much easier. Tools like Anvyl provide real-time visibility into supplier performance, purchase orders, and shipment tracking, making it simpler to manage multiple suppliers and stay on top of disruptions.

  1. Monitor and adjust

A diversified supply chain strategy isn’t a set-it-and-forget-it approach. To ensure they’re prepared to turn on a time — whether that means adding new suppliers, renegotiating contracts, or changing sourcing strategies — brands need supply chain reporting tools in place that put real-time insights about emerging risks at their fingertips. 

The competitive edge of working with pre-vetted suppliers

Its many benefits aside, the reality is that supplier diversification can be just as risky as sole sourcing if brands don’t know how to properly vet suppliers. Cutting corners in the process or even relying on popular platforms like Alibaba that offer infinite choices when it comes to suppliers, but little in the way of due diligence, come at an extremely high risk.

When suppliers are pre-vetted, it means that another company has already vouched for their reliability, compliance, and performance — giving brands vital information about what to expect from the partnership before they enter into it. This pre-screening process alone significantly reduces the risk of poor supplier performance, and ensures that the newly diversified supply chain runs smoothly from day one. 

Finding pre-vetted suppliers is easy with Anvyl’s Marketplace, which offers a curated sourcing service that introduces brands to suppliers who have been personally audited by Anvyl’s global team of experts on the ground — and passed verification for quality, customer service, and competitive costs.

They say that a supply chain is only as strong as its weakest link. Anvyl is here to play matchmaker for brands looking to strengthen their supply chain with reputable suppliers and take the hard work of vetting suppliers off their plates.  

Pre-vetted suppliers are the key to a diversified, future-proof supply chain 

The lessons from recent supply chain disruptions are clear: businesses must spread their risks across multiple suppliers to safeguard against geopolitical, economic, and operational shocks. 

But diversification alone isn’t enough. Brands must also ensure that they’re working with reliable, pre-vetted suppliers who can deliver on their promises and help drive long-term success.

By prioritizing pre-vetted suppliers in their diversification strategy and adopting technology for real-time visibility, brands can build a more resilient and agile supply chain. In doing so, they not only protect themselves against future disruptions but also position themselves to thrive in an increasingly complex and competitive global marketplace today, tomorrow, and years down the line.

Ready to revolutionize your supply chain with trusted, reputable suppliers? Book a meeting with our Sourcing Strategist today.
Book a Meeting
  • Share:
  • facebook
  • linkedin
  • twitter

Ready To Get Started?

Explore how Anvyl can help you manage your production process today.

See How It Works