3 ways to diversify your business supply chain against risks

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Australian businesses faced a multitude of supply chain risks throughout 2020 and 2021, and responded accordingly by diversifying their operations. If your business has yet to diversify its supply chain, just what actions can you take to mitigate future risks? Here are some insights from our latest DHL Export Barometer to get you started.

The COVID-19 pandemic caused major disruptions to global supply chains between 2020 to 2022, affecting the livelihood of innumerable businesses worldwide. Here in Australia, key concerns faced by businesses included travel restrictions that hampered visiting overseas business contacts, rising costs of tariffs and other associated costs, and strong competition from a global market in an increasingly e-commerce-focused shopping landscape.

A year on, we’re seeing several encouraging export trends that suggest Australian businesses are beginning to bounce back from these initial setbacks. Out of the 948 Australian businesses surveyed, 70% predicted an increase in export revenue over the upcoming 12 months – a 1% increase from the previous year, and one of the highest levels of exporter confidence since the Barometer reports began in 2003. While many businesses are still on the mend, these promising trends suggest that easier times are ahead for Australian export businesses. 

Find out some of the common export challenges faced due to supply chain disruptions and discover the state of things today in the DHL Export Barometer 2022.

The factors that have enabled these businesses to make it through the challenges of the pandemic are multifold, but one strategy, in particular, stands out: the ability to diversify their business supply chain in order to mitigate risks. Businesses in the report that implemented supply chain diversification measures were more likely to report an expected increase in revenue – no mean feat considering the continued pressure on Australian businesses within fluctuating and volatile global markets.

If your business has yet to embark on supplier or supply chain diversification measures, it’s not too late to begin. Here are some of the most common ways surveyed businesses increased their supply chain diversity and future-proofed their operations:

1. Sourcing from multiple or different suppliers

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The most common way businesses diversified their supply chain was through sourcing from multiple or different suppliers, a measure undertaken by 47% of respondents. 30% of survey respondents also undertook a similar method of sourcing products and/or raw materials from alternative markets.

These are some of the most straightforward ways a business can diversify their supply. They can pay off immensely even if you are unable to pursue other diversification measures at the moment.

If you have only one supplier or rely on a small group of suppliers for your products, any upsets faced by those suppliers will naturally affect you as well. Having multiple or different suppliers gives you the flexibility to make changes quickly in response to sudden upsets, serving as a safety net in times of crisis or emergency. Having a diverse list of suppliers also gives you better agility when responding to increased demands from your customers, such as during seasonal promotions or sales events.

2. Increasing stock levels

If you are intending to diversify against risks while growing your business, another supply chain diversification measure to consider is increasing and optimising your stock levels. This was undertaken by 46% of respondents, putting its importance virtually on par with sourcing from multiple suppliers.

Optimising your stock levels helps to ensure stock availability and makes it easier to manage a growing range of SKUs – both of which then enable you to respond better to changing trends and supply chain demands. Having an inventory management system to handle changing stock levels will also help you achieve accurate demand forecasting by predicting how to grow or shrink certain product lines according to customer buying patterns.

3. Manufacturing or sourcing more domestically within Australia

Not all supply chain diversification methods require you to look towards alternative suppliers in overseas markets. Manufacturing or sourcing more domestically within Australia – a measure undertaken by 23% of respondents – can also contribute to diversifying your business against risks.

One of the key benefits of domestic sourcing is its shorter lead times, particularly for shipping, delivery, and transportation. This can help your business avoid the largest impacts from any shocks to the global supply chain. Domestic sourcing also allows you to seek out, build, and strengthen relationships with local suppliers, which can mean faster communication and a better understanding of local market demands.

However, domestic sourcing still puts you at risk of impacts from local or regional shocks, and it’s best to combine it with other diversification strategies to insulate your business against supply chain disruptions in the long run.

Grow your business with DHL Express

Diversifying your business against risks is the first step to ensuring you will be able to weather any unexpected hits to the global supply chain.

As a global leader in logistics and end-to-end delivery, DHL Express is uniquely positioned to provide business owners across Australia with the latest supply chain insights and solutions. Learn more from our DHL Export Barometer 2022 including which free trade agreements can support your export strategy, how to prepare your business for export challenges, and how you can boost international e-commerce sales in 2023.

Open a DHL Express business account today to discover more ways we can help your business succeed.