Diversified supply chains are resilient supply chains. DHL’s new trend report “Supply Chain Diversification” identifies four ways in which companies can improve the robustness of their supply chains. These dimensions help you analyze dynamics and patterns, and adapt your supply chain strategy accordingly. The report also sets a new industry standard with the first comprehensive definition of supply chain diversification.
Trade Globalization Calls for Supply Chain Diversification
Globalization continues to progress, as shown in the DHL Global Connectedness Report 2024. This requires a complex network of global players. The recent shockwaves caused by COVID-19, geopolitical crises, or natural disasters have led to considerable volatility in supply chains, and disturbances or even interruptions have increased. That companies are seeking to strengthen their supply chains through greater diversification is a logical response.
No Industry Standard for Supply Chain Diversification
But what exactly does diversification in this context mean? Surprisingly, there is still neither a standardized definition nor a comprehensive model for this elementary process. That is why DHL, together with renowned researchers, has addressed this issue and now presents a new definition of supply chain diversification and a multidimensional model in the current DHL Trend Report.
Reactive Adjustments to the Supply Chain Often Come Too Late
First, the key takeaway: supply chain diversification must be proactive. This means that companies should integrate one or more risk mitigating components into their supply chains to reduce the impact of potential events with a negative impact on the supply chain. The keywords are multi-shored supply networks, multi-sourcing, parallel modes of transportation, and concurrent or redundant logistics operations. These cornerstones constitute the four dimensions of DHL’s diversification model.
Recent global events and dynamics have demonstrated the importance of robust supply chains and the need for organizations to adapt their global supply networks accordingly. At DHL, we are committed to helping our customers improve resilience in a sustainable way by providing tailored solutions, sharing best practices, and fostering collaborative initiatives.
Katja Busch, Chief Commercial Officer and Head of DHL Customer Solutions & Innovation
DHL Definition: Supply Chain Diversification
After an in-depth analysis of the specific requirements for the diversification of the supply chain, the strategy managers of DHL and their academic partners have developed the following definition:
Supply chain Diversification is a proactive strategy that involves embedding one or more of these four dimensions into the supply chain network: multi-shoring, multi-sourcing, adding modes of transport, and diversifying logistics operations.
Diversification enables rapid adaptation and reconfiguration of the supply chain to enhance customer centricity, resilience, sustainability, and agility which can improve competitive advantage.
Supply chain diversification along the entire supply chain is facilitated by technology and proactive relationship management along the entire supply chain enabling multi-stakeholder collaboration.
DHL Trend Report Supply on Chain Diversification
To learn more about and download the DHL trend report on supply chain diversification, click here.
Four Dimensions of Supply Chain Diversification
The four dimensions of supply chain diversification constitute the core of DHL’s new strategic model, based on this definition and developed in collaboration with Professor Emeritus Richard Wilding OBE, an internationally recognized expert in logistics and supply chain management.
- Multi-shoring: To mitigate risk, manufacturing and supplier locations are distributed across regions or countries. This includes duplicating manufacturing capabilities and using the same supplier in different locations.
- Multi-sourcing in the production and supplier network: The network is expanded to include redundant suppliers and manufacturing capacity, which reduces financial and operational risks.
- Modes of transportation: Several modes of transport are used simultaneously, covering all stages of transport, including first mile, long haul, and last mile, to diversify routes and reduce risks.
- Logistics operations: The logistics infrastructure is extended to include additional functions such as hubs, warehouses, and distribution centers. This may include additional nearby redundant capacity and the outsourcing of certain logistics activities for diversification.
This latest DHL Trend Report underscores our aim to be at the forefront of supply chain trends to empower our customers but also businesses across industries. We equip companies with the latest research, our industry expertise, tools and logistics solutions needed to bolster resilience, drive agility, improve sustainability, and thus grow their competitive advantage.
Klaus Dohrmann, Vice President and Head of Innovation and Trend Research, DHL Customer Solutions & Innovation
Illustrative Examples Round off the Report
Another benefit of this concise report lies in the practical case studies that companies can use to assess their own level of diversification and develop a strategy to improve it.
