Diversification Strategies to Reduce Supply Chain Dependency Risks

Alice Lawrence

No u2wej_v1, OSF Preprints from Center for Open Science

Abstract: In today’s volatile global economy, over-reliance on single-source suppliers or geographically concentrated supply chains exposes businesses to significant risks ranging from geopolitical disruptions and natural disasters to trade restrictions and pandemics. This paper explores diversification as a strategic approach to mitigating these supply chain dependency risks. Through an analysis of real-world case studies and recent academic research, we examine how firms in sectors such as automotive, pharmaceuticals, and electronics have implemented multi-sourcing, regionalization, vertical integration, and strategic inventory management to build more resilient supply chains. The findings suggest that while diversification involves added costs and complexity, it ultimately enhances operational agility and long-term stability. Moreover, we discuss the role of digital tools, such as supply chain mapping and AI-driven risk assessment, in supporting informed diversification decisions. By balancing cost efficiency with resilience, companies can better withstand unforeseen disruptions and maintain a competitive advantage in an increasingly uncertain environment. Keywords: supply chain risk, diversification strategy, multi-sourcing, resilience, supply chain management, dependency risk, global trade disruptions, supply chain resilience, procurement strategy, operational agility

Date: 2024-07-14
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:u2wej_v1

DOI: 10.31219/osf.io/u2wej_v1

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