What does diversification of suppliers in a supply chain address?

Diversification of suppliers in a supply chain primarily addresses risks and potential disruptions. By utilizing multiple suppliers for the same materials or components, a company can minimize the impact of disruptions that may arise from a single source. This could include risks related to natural disasters, political instability, or supply shortages that could affect a specific supplier. Having a diverse supplier base provides a safety net, allowing the company to switch to an alternative supplier if one is unable to deliver, thereby ensuring continuity of supply and mitigating potential risks associated with reliance on a single supplier.

Although there may be some cost reductions, quality improvements, or increased compliance from having multiple suppliers, the core benefit of supplier diversification lies in its capacity to enhance the resilience of the supply chain against unforeseen events. The focus on risk management in this context underscores the strategic advantage companies gain from having a robust and varied supplier network.