How to diversify your supplier base

As a C-Suite executive, you likely understand all too well the risk of relying on one or only a few suppliers for vital goods and services. If a supplier experiences delays in fulfilling an order, it can cause serious disruptions throughout your company—affecting both performance and profits. The need to find alternate sources for essential products has never been more urgent than it is today. That's why understanding how to diversify your supplier base is crucial to helping reduce risk and improving overall success and profitability in the long term. 

In this blog post, we'll explore 6 strategies to diversifying your supplier family. These tips may help your business ensure product quality, reduce costs and gain new perspectives toward reaching a wider range of customers. 

1. Understand your current suppliers and their strengths/weaknesses

Understanding your current suppliers and their strengths and weaknesses is an essential step for any business looking to diversify its supplier base. Keep track of the reliability and quality provided by any current suppliers so you can create a benchmark for choosing new ones. Knowing what your current suppliers bring to the table in terms of quality, cost, production time, customer service and other key criteria also helps identify areas where diversity can add value and complement existing capabilities. 

2. Identify market trends in terms of materials and services

Staying ahead of current market trends is an important part of diversifying your supplier base and keeping your business competitive. Knowing what materials and services are currently in demand, as well as anticipating future needs, will help you determine which suppliers to engage with and how best to allocate resources. Actively monitor the market, so you can stay aware of any changes that may require your business to adjust or modify your suppliers or processes. This will help streamline your operations while also improving efficiency, quality and cost management.

3. Establish criteria for evaluating potential suppliers 

When selecting potential suppliers, it's imperative to go through an evaluation process. Having pre-defined criteria that highlight what you're looking for in a supplier will aid you in selecting the appropriate one. Be thorough in assessing whether a supplier is right for you, including factors like delivery quality, ability to reduce overhead costs and financial stability. Additionally, vary your criteria across different departments, if needed. This will ultimately lead to more effective decision making. 

4. Develop an approach to onboard new suppliers 

Developing a streamlined onboarding process can bring many advantages, from faster timeline execution to better cost management. To ensure there is a streamlined approach, your business should create a workflow that establishes key steps and responsibilities for the onboarding process. This checklist will provide team members with guidance, clear expectations and adequate resources to onboard new suppliers. Following this method can also help you create productive relationships from the beginning. 

5. Monitor performance and incorporate feedback from existing suppliers

An essential part of managing any supplier base is periodically monitoring performance and identifying any areas for improvement. Your business should incorporate this feedback into their operations to ensure that the best-suited suppliers are actively engaged in the procurement process. Doing so can increase your competitiveness in sourcing quality goods and services at scale.

6. Create a supplier diversity program to empower small and underrepresented suppliers

When choosing new suppliers, it’s important to ensure they’re diverse in ownership, staff and perspectives, too. A supplier diversity program will help your business use more small, local and minority-owned suppliers. In doing so, your business will not only support the communities from which the suppliers originate, but also expand your audience and customer base. Additionally, the generally smaller size of these suppliers often allows them to be more nimble, innovative and willing to adapt to change. This will give your business an advantage should there be a shift in the marketplace or your procurement needs. 

Adopting a strategy of supplier diversification can help ensure stability, competitive pricing and innovation. With an understanding of current suppliers and market trends, intelligent criteria for evaluating potential suppliers and a streamlined onboarding process, you can build a robust supplier base tailored to your needs across industries. Stay ahead by thinking strategically about diversifying your supplier base and implementing one or all these tactics into your business processes.