DHL offers framework to building supply chain diversification

Supply chain leaders are getting little pushback from upper management when it comes to efforts around building a more sustainable supply chains. In fact, the C-suite is encouraging it.

But for many organizations, resiliency remains just a word. Sure, there are efforts to utilize sustainable transportation such as electric trucks. There are initiatives around nearshoring and reshoring designed to create more diverse supply chains. And there are pushes to protect supply chains against political winds, which seem to be blowing stronger than ever across the globe.

A recent report from Accenture and EcoVadis found the ability to deliver on sustainability goals is a priority for 71% of procurement programs. 

However, like many changes in business, how to get started is sometimes the biggest obstacle to success. Not knowing how to develop a sustainability program can prevent organizations from dedicating resources to get started.

DHL, in collaboration with Emeritus Professor Richard Wilding OBE of Cranfield University, has developed a framework for it says is a path to supply chain diversification. DHL defines diversification as a “proactive approach where companies incorporate one of several dimensions into their supply chains to minimize risk.”

The framework, which features four dimensions, is part of DHL’s latest Trend Report, Supply Chain Diversification.

“The events of the last years have shown us the importance of resilient supply chains and companies adapting their global supply networks accordingly,” Katja Busch, chief commercial officer and head of DHL Customer Solutions & Innovation, said in a statement. “At DHL we are committed to supporting our customers in staying resilient in a sustainable way by providing tailored solutions, sharing best practices, and facilitating collaborative initiatives.”

Wilding is the former chair in supply chain strategy at the Centre for Logistics, Procurement and Supply Chain Management, Cranfield School of Management UK, and Immediate past Chairman of the Chartered Institute of Logistics & Transport U.K.

The model created by DHL and Wilding is designed to be implemented by DHL’s partners, but also the broader supply chain.

“The framework provided here can be leveraged at different stages of strategic supply chain management, from interpreting current market dynamics and patterns and assessing the status quo to evaluating options and implementing new diversification strategies,” Busch and Klaus Dohrmann, vice president and head of innovation and trend research at DHL Customer Solutions & Innovation, wrote in the introduction to the 24-page report.

(Photo: DHL)

The report defines the four dimensions as:

Dimension 1 – Multi shoring: This involves spreading manufacturing and supplier locations across different regions or countries to mitigate risks. It includes duplicating manufacturing capabilities and using the same supplier in different locations.

Dimension 2 – Manufacturing & supplier network: Expanding the network to include redundant suppliers and manufacturing capacities to address financial and operational risks.

Dimension 3 – Mode of transportation: Utilizing multiple transportation modes simultaneously, covering all stages of transport, including first mile, long haul, and last mile, to diversify routes and reduce risk.

Dimension 4 – Logistics operations: Expanding logistics infrastructure to include additional functions like hubs, warehouses, and distribution centers. This may involve adding redundant capacity nearby and outsourcing certain logistics activities for diversification.

Implementing a strategy

The report goes on to outline a strategy for facilitating the initial exploration of a supply chain diversification strategy. The approach incorporates the four dimensions into each step. The full report, including how each dimension fits into the six strategies, is available here.

The six strategies are:

1. Analyze the current level of supply chain diversification
2. Determine the envisioned level of supply chain diversification
3. Evaluate the impacts of diversification
4. Identify required resources
5. Decision
6. Implement and manage the diversification strategy

“Supply chain resilience holds utmost importance in ensuring the attractiveness and viability of global trade. For businesses, the diversification of supply chains to adapt to the evolving global economic landscape, mitigate disruptions, and maintain seamless operations is a cornerstone of sustainable long-term economic success,” explained Yin Zou, executive vice president of corporate development, DHL Group.

SC
MR