Ensuring Stability Through Supply Chain Diversification

Ensuring Stability Through Supply Chain Diversification
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Many businesses believe — or at least hope — that the supply chain disruptions of the past few years are symptoms of a temporary problem. Whether this is indeed the case is anyone guess. What’s certain is that a combination of aging infrastructure, natural disasters, a volatile economy and geopolitical tensions with China is underscoring the need for change in global supply chains.

For decades, China has provided the U.S. with inexpensive and reliable products. Despite the disputes that exist today between the two countries, imports from China to the U.S. in 2022 increased by $31.8 billion to $536.8 billion, and exports rose by $2.4 billion to $153.8 billion, over the prior year, according to the U.S. Department of Commerce’s Bureau of Economic Analysis.

Those figures don’t guarantee that the U.S.’s historical reliance on China is safe or sustainable. If trade slows because of a worsening economic conflict, or as the result of China’s continuing domestic supply chain challenges, such as pandemic-related shutdowns, unprepared U.S. businesses will have limited options.

Total dependency on China doesn’t work. Diversification is key. Among the options for U.S. companies is the reshoring of manufacturing back to the U.S. This approach has become increasingly popular in recent years, as organizations attempt to reduce costs and increase efficiency. It’s vital that they create a stable sourcing strategy that ensures resilience and longevity. However, reshoring isn’t without its challenges. Among the issues to be considered is the short-term disruption it causes to supply chains, as companies struggle to re-source components, identify new product manufacturers and deal with different logistics providers.

Near-shoring — turning to producers in countries located closer to the U.S. — is another option for brands and original equipment manufacturers looking to reduce their reliance on China. But any move to re-think sourcing strategies must take into account the need for supplier diversification. That’s the only way to ensure a health and resilient supply chain — one that can adjust to sudden disruptions in any one part of the world.

We’re at a unique inflection point, where we have the potential to completely reshape global trade. That mission could prove especially challenging for small to medium-sized businesses, which would do well to consider turning to outside experts, such as seasoned, digital-first freight forwarders, for help. For many manufacturers, shipping and logistics isn’t their core business, so access to a user-friendly platform from a trusted partner is critical in helping to take the guesswork out of international moves.

By promoting diversification and multinational sourcing, business owners and supply chain leaders can increase their resilience and protect against unexpected disruptions for years to come.

Carmit Glik is chief executive officer and a co-founding member of Ship4wd.

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