CFOs need new strategies to diversify their supply chain
For many decades as globalization picked up steam, many CFOs opted to forge strong relationships with strategic supply chain partners. After all, the entire point of the supply chain for most industries was to lower their manufacturing costs to enable them to compete. Volume was a key negotiation asset to drive those agreements with fewer suppliers. This resulted in consolidation within the supply chain.
Since the pandemic, many industries have experienced unprecedented supply chain disruptions and risks.
This would be a good time for CFOs to evaluate strategies to diversify their supply chain relationships. Many companies are now exploring a diversification strategy for their supply chain, even if this means landing less attractive terms and higher costs.
Deloitte offers an insightful and short guide on this very topic titled “How can CFOs prepare for supply chain diversification?”
As per Deloitte:
Finance should consider partnering with supply chain operations and procurement groups to analyze the financial impact of various mitigation strategies for their organization. Such strategies may include identifying product materials or components presenting the biggest risk to production and performing cost/benefit analysis for various strategies (such as supplier diversification, increasing safety stock levels, regional sourcing, and joint venture relationships with suppliers) that can be activated to mitigate those risks.