*By Kerim Kfuri, President & CEO, The Atlas Network, LLC

From geopolitical tensions and shifts in trade policy to lingering pandemic disruptions, today’s beverage alcohol supply chain landscape is becoming increasingly volatile. A single event can halt production, strand inventory, or make your primary supplier suddenly unavailable or cost-prohibitive. For many brands, the question is no longer if they should diversify their supply chains, but how to do it strategically.

When disruption strikes, the instinct is to move quickly to find an alternative supplier and restore operations. However, many businesses underestimate the complexity involved in such transitions. Switching from a well-functioning supplier often introduces unexpected challenges and hidden costs that can erode anticipated savings or create new operational risks, threatening the business.

The most resilient companies don’t just react to disruptions, they proactively build vetted alternatives into their supply chain strategy. But diversification done poorly can be more damaging than maintaining the status quo. In this article, we’ll consider the key factors to consider before making the leap between supply chain partners.

Materials and Accessibility

The first question organizations must ask is how accessible the raw materials or components needed for manufacturing their products truly are. If costs are high due to importation or a lack of availability in local markets, then product costs could skyrocket, potentially offsetting any benefits from a new alternative supplier relationship.

Output and Production Capacity

Can a proposed alternative supply chain keep up and produce at the levels required to service the business and its customers? If not, this creates a situation of production scarcity, which reduces sales and increases the cost per unit based on the factors of supply and demand. Such cost increases may not be sustainable and may fully offset any benefits considered when shifting to a new supplier relationship.

Resources and Workforce Quality

The human element remains critical in any supply chain evaluation. Are the employees at the alternative supply chain well-trained and skilled? If not, this increases defect levels, thereby reducing output quality, which in turn decreases efficiency and increases cost per unit. It’s people who still manage the process, and if those people are unskilled or lack training, it could fully disrupt productions being done on behalf of any contracted business.

Technology and Scalability

Does the new supply chain partner have technology, not just for the present, but also for the future? Such a question is critical as it relates to business scalability. With unsupported or non-adaptable technology, an alternative supplier may create production breakdowns, delays, and other challenges that could drastically increase costs and damage an organization’s reputation.

True Costs

Many businesses believe they can simply shift to an alternative supplier, but have not truly analyzed the direct and indirect costs involved. As mentioned earlier, there are many factors to consider when evaluating alternative suppliers, and the only way to truly mitigate such challenges is to conduct a thorough interviewing and vetting process with your new suppliers. Before completely shifting away from previous suppliers, organizations should consider trial runs or even parallel manufacturing to ensure that production, quality, and timelines meet their standards.

Final Thoughts

In a shifting supply chain environment, a common knee-jerk reaction is to simply leave current suppliers in the hopes of finding greener pastures elsewhere. However, a deeper analysis must be undertaken to truly mitigate risks and ensure the organization is not saving one dollar while costing the business four dollars in headaches. Supply chain decisions have long-term ramifications that extend far beyond initial cost savings.

For more information on how The Atlas Network can help with your Supply Chain Needs or challenges, please feel free to follow the link below:

Park Street Lead Gen – The Atlas Network

http://www.kerimkfuri.com/connect