When I first started out as a manufacturer, I had one supplier in the U.S. But I quickly realized that manufacturing in small quantities in the U.S. was not going to work. That is, if I wanted to make any money at all. So I started manufacturing in large volume with a factory in Malaysia. My costs were still too high. So I eventually established manufacturing in China and in Argentina. But cost wasn’t the only reason I decided to do that.

Disruption in supply chains

Disruption in supply chains can be caused by many things, like weather, rising labor costs, and political unrest. I didn’t want anything to disrupt my supply chain, so I diversified my manufacturing as much as possible.

Finally, because of COVID and the China trade war, it has forced many companies to diversify their supply chains and reduce their dependence on China solely. U.S. brands are now sourcing closer to home in Latin and South America.

Supply chains are vulnerable

Supply chains are vulnerable to hurricanes, flooding, earthquakes, storms and wildfires. Anything could disrupt a manufacturer’s business in their own country, but other countries have their own problems including weather. Today our global supply chains depend on ports, highways and railways that can be forced to shut down in bad weather.

Severe weather disrupts supply chains

In 2014 severe weather disrupted over 60% of the automobile industry. The weather had a direct affect on supply chain and manufacturing operations. In 2016 the Kumamoto earthquake forced the auto industry to suspend production.

Severe flooding in Thailand had a ripple effect in product shortages among worldwide tech companies like including Apple, Dell and Hewlett-Packard Co.

Hurricane Maria, which hit Puerto Rico on September 20, 2017, is a good example of a catastrophe that disrupted supply chains. The destruction of medical device manufacturing capacity in Puerto Rico was brought on by the hurricane. It led to a national shortage of medical IVs, which forced some hospitals to use alternative products and find new suppliers.

Competition and profit

According to an article in Supply Chain Digital:

“More choice within the supply chain also means a greater opportunity to analyze cost, location, and the range of goods available when you come to selecting the ones that works best. A diverse supply chain can also encourage competition between suppliers to drive down prices.

A study by the Hackett Group found that those with a diverse supply chain had lower overall operating costs and spent 20% less on buying. This of course leads to a higher ROI, by being able to offer more competitive prices, improving quality of service, and leading to satisfied customers. At a local level, it also increases spend and promotes employment by boosting economies.”

Avoid shortage of supplies

One of the components of my product is a velcro band. In the beginning I only had one supplier. But then I got a big order and they weren’t able to supply the amount I needed. This cut my shipping date very close. I had to scramble at the last minute to find another supplier who could manufacture enough for the order. That was the last time I cut things that close. I found 2 other suppliers as backups in case I needed them. Manufacturers should have multiple sources ready to go if they need them.

Diversification is one of the best ways to avoid supply chain disruption in the first place. Whether you’re looking for lower costs or doing it as a way to avoid disruption of your supply chain before it happens. You need to be flexible and prepare for any kind of problem the market may throw at you.