Navigation and Content
You are in  United States of America
or Select a different country
The Logistics Trend Radar 7.0 - Insights. Shaping Tomorrow

Trends Filter

Use the toggles below to filter visible trends.

Focus Areas
Trend Clusters
Sectors
Reset Filters Apply & Close
Radar Dial
3D Printing3D Printing
Bio-Based MaterialsBio-Based Materials
BlockchainsBlockchains
CircularityCircularity
Computer VisionComputer Vision
Cybersecurity 2.0Cybersecurity 2.0
DecarbonizationDecarbonization
Digital MarketplacesDigital Marketplaces
Digital TwinsDigital Twins
Diversity, Equity, Inclusion, BelongingDiversity, Equity, Inclusion, Belonging
DronesDrones
Edge ComputingEdge Computing
Everything As A ServiceEverything As A Service
ExoskeletonsExoskeletons
Extended RealityExtended Reality
Indoor Mobile RobotsIndoor Mobile Robots
Mass PersonalizationMass Personalization
MetaversesMetaverses
Next-Generation PackagingNext-Generation Packaging
Next-Generation ConnectivityNext-Generation Connectivity
Outdoor Autonomous VehiclesOutdoor Autonomous Vehicles
Silver EconomySilver Economy
Smart PrintablesSmart Printables
SmartificationSmartification
Space EconomySpace Economy
Stationary RoboticsStationary Robotics
Supply Chain DiversificationSupply Chain Diversification
Wearable SensorsWearable Sensors
AI EthicsAI Ethics
ESG AdvocacyESG Advocacy
Workforce FocusWorkforce Focus
E-Commerce
Evolution
E-Commerce
Evolution
Green Urban TransformationGreen Urban Transformation
Renewable Energy InfrastructureRenewable Energy Infrastructure
Sustainable FuelsSustainable Fuels
Vehicle ElectrificationVehicle Electrification
Advanced AnalyticsAdvanced Analytics
Gen AIGen AI
Remote OperationRemote Operation
Audio AIAudio AI
Hold Shift & Scroll to Zoom
Trend Header Image

Trend Name

Social & Business Trend
Impact:
Adoption:

Read Full Article

Trend Overview

The trend of Supply Chain Diversification refers to the proactive strategy that involves embedding one or more of these four dimensions into the supply chain network: multi-shoring, multi-sourcing, adding modes of transport, and diversifying logistics operations.

It enables rapid adaption and reconfiguration of the supply chain to enhance customer centricity, resilience, sustainability, and agility which can improve competitive advantage.

Supply chain diversification is facilitated by technology and proactive relationship management along the entire supply chain enabling multi-stakeholder collaboration.

Since 1980, global trade has increased more than tenfold, reaching a record high of over US$ 32 trillion in 2022. DHL’s own analysis of global connectedness confirms that globalization hit a peak in 2022 and remained near that level in 2023.

Hidden behind these figures is a complex network of globally interconnected supply chains with an ecosystem of countless customers, suppliers, service providers, and partners. The recent accumulation of shockwaves caused by COVID-19, geopolitical crises, and natural disasters has led to considerable volatility, with disruption increasing by 183% since 2019 (33% in 2023 alone). The record highs also disguise the challenge of agility and resilience in supply chains, which prevent companies from responding effectively.

Understanding the complexities and dimensions of supply chain diversification and how they can be leveraged strategically beyond resilience can ultimately be a key to gaining a competitive advantage. Adopting a proactive approach to supply chain disruption is a strategic move for organizations, enabling them to increase sustainability, customer centricity, resilience, agility, and profitability in an uncertain business world.

In recent years, many companies have conducted strategic reviews of their supply chains to evaluate the need for diversification. For many organizations, these reviews have become a routine practice, and several have already implemented corresponding changes. These changes come in many forms, with the level of intensity depending on each company’s markets, strategies, objectives, and risk-taking appetite.

Given the strategic importance of resilient and agile supply chains for global trade as well as for sustainable long-term success of organizations, the impact of supply chain diversification is considered to be very significant.

Supply Chain Diversification Model

Source: DHL Group (2024): Supply Chain Diversification Trend Report

Relevance to the Future of Logistics

Multi-shoring the supply network

The first dimension involves geographical diversification. Multi-shoring means introducing redundant manufacturing capacities or additional supplier locations in separate areas. This might include adding locations in other countries or even continents to mitigate operational, compliance, or reputational risks. Multi-shoring can involve the same supplier but from an additional location – for example, getting the same part from two different plants.

The spectrum of multi-shoring diversification ranges from a supply network built on one country (low) to one widely dispersed across multiple countries or even continents (high).

As an example, after years of manufacturing most of their products in China, many technology companies are now seeking to add manufacturing capabilities elsewhere, mainly in other Southeast Asian countries, often referred to as the “China+1” strategy.

For instance, HP is shifting its laptop production to Thailand, and Foxconn is moving a portion of its assembly capabilities from China to Vietnam. Tech-giant Apple is also shifting production from China, where currently most iPhones, iPads, and other Apple products are produced, to India, Vietnam, and other Asian countries. Apple now builds around 14% of its iPhones in India, twice the amount it produced there the previous year.

Also in 2022, LEGO Group announced plans to invest more than $1 billion in a new factory in Chesterfield County, Virginia, its first in the United States and seventh factory globally. The company has served the North American market from its site in Mexico. The group says it positions its factories close to its biggest markets to shorten the distance its products must travel, allowing the company to rapidly respond to changing consumer demand and better manage its carbon footprint.

Multi-sourcing the supply network

Multi-sourcing focuses on quantity rather than geography. The most common approach involves adding redundant suppliers, although integrating additional manufacturing capacities is also standard practice. Diversification can take place within local or regional ecosystems, such as adding a new supplier located in the same city. Multi-sourcing is primarily used to mitigate financial or operational risks, such as a supplier’s inability to deliver on time or at all.

The breadth of a company’s supply network can range from having a single supplier for a specific part or product (low) to maintaining multiple suppliers on multiple tiers for each part or product (high).

Although multi-sourcing is not a new concept, and companies across all sectors continually assess and adapt their supplier bases, there has been a noticeable increase in recent years driven by higher supply chain volatility. The 2022 EY Industrial Supply Chain Survey found that 62% of 6 industrial companies surveyed had made significant changes to their supplier base in the previous 24 months and 77% had or were planning to increase their total number of suppliers.

One of the world's largest fashion groups provides a prominent example of a business effectively leveraging multi-sourcing on a global scale. The company strategically spreads its supply chain across thousands of facilities and direct suppliers worldwide. This strategy allows the company to adapt swiftly to peak customer demand and leverage the unique strengths of each supplier. Multiple suppliers also mean it can respond quickly to disruption, redistributing production to ensure products are always in stock.

Parallel modes of transportation

The third dimension centers on utilizing more modes of transportation for the trade lane of a particular product or part. Adding at least one mode to any part of the supply chain (first mile, long haul, last mile, etc.) makes a supply chain more diversified than it was before. Modes include air, ocean, rail, and road. Simultaneously, using various modes of transportation or multi-modal solutions for a part or product also typically diversifies shipping routes, which can reduce operational risk and buffer volatilities in demand.

It’s important to note that adding modes of transportation is not a contingency plan but rather a parallel transportation method for the same point-to-point connection. Furthermore, different modes of transportation offer varying lead times, which must be considered and aligned with the business model.

Mode diversification spans from one mode for each part or product (low) to parallel modes for each part or product (high).

A retail market leader for example provides a best-practice example of this dimension of supply chain diversification. Aiming to respond rapidly to consumer preferences and trends within 10 to 14 days, the company utilizes all modes of transportation across all supply lines, opting, for instance, to ship goods via air freight between regions rather than using slower ocean freight. This allows swift and flexible stock reallocation between markets based on customer requirements and any disruptions.

Diversifying logistics operations

The final dimension of supply chain diversification involves expanding logistics capabilities. This means augmenting the logistics infrastructure with additional capacities, such as hubs, warehouses, and distribution centers. Depending on the requirements, this could include redundant logistics capabilities in other locations both near and far. Diversifying logistics operations may also involve outsourcing certain logistics activities. Like multi-shoring and multi-sourcing, a diversified logistics operation provides alternative options that maintain continuity in the supply chain during disruptions.

The spectrum of logistics operations diversification ranges from a single logistics operation for a specific need (low) to multiple redundancies across diverse geographies (high).

A global sportswear and athletic equipment manufacturer provides an excellent example of a company transitioning from a centralized to a decentralized and diversified logistics network. While the company aims to optimize profitability, the goal of its supply chain strategy is also to improve resilience. It delivers products from production sites directly to regional and local warehouses, enhancing resilience and cost efficiency. The company has also increased its logistics footprint, establishing a presence in South America and India, opening a new hub in southern Europe, and expanding operations along the east and west coasts of the United States.

Challenges

Challenge 1

It takes time and resources to source, pre-qualify, onboard, and manage many more suppliers, and supply chain complexity increases when also multi-shoring, adding transportation modes, and diversifying logistics operations.

Challenge 2

Building a new supplier infrastructure in a different country or region for multi-shoring purposes presents challenges, as it necessitates acquiring new organizational knowledge and skills.

Challenge 3

While the risk of a comprehensive manufacturing stoppage or retail backlog is lowered by multi-sourcing, the risk of partial disruption is raised, since each source has its own risk factors.

Challenge 4

Multi-mode transportation may result in higher CO2 emissions, adversely affecting sustainability goals.

Challenge 5

Diversified supply chain setups can increase operational costs, reducing profitability.

It takes time and resources to source, pre-qualify, onboard, and manage many more suppliers, and supply chain complexity increases when also multi-shoring, adding transportation modes, and diversifying logistics operations.
Building a new supplier infrastructure in a different country or region for multi-shoring purposes presents challenges, as it necessitates acquiring new organizational knowledge and skills.
While the risk of a comprehensive manufacturing stoppage or retail backlog is lowered by multi-sourcing, the risk of partial disruption is raised, since each source has its own risk factors.
Multi-mode transportation may result in higher CO2 emissions, adversely affecting sustainability goals.
Diversified supply chain setups can increase operational costs, reducing profitability.

Outlook

Supply chain diversification has already become a popular theme in supply chain management. It is an essential strategic lever for building resilience, enhancing customer centricity, driving profitability, improving sustainability, and gaining a competitive advantage.

With disruption accelerating, diversified supply chains are expected to become increasingly significant. Recent experience demonstrates that companies with strategically diversified supply chains are better positioned to navigate uncertainties and seize emerging opportunities. Today’s new normal demands continuous assessment and more regular reconfigurations of supply chains to meet new requirements, enhance risk profiles, and maintain or improve agility and resilience.

Transparency and visibility across the entire supply chain are imperative and the foundation for success, with state-of-the-art technology, supply chain management tools, and strong partnerships playing a decisive role.

This trend should be ACTIVELY monitored,with implementations available for many use cases today.

Need support prioritizing high impact trends for your business?

Request a complimentary Trend Radar Mapping session at your regional DHL Innovation Center and prepare for the future today.

Request a Session

Stay Connected

Sign up for the DHL Innovation Insights newsletter for more trends direct to your inbox.

Yes, sign me up!

Sources

  1. 1. DHL (2024): 2024 DHL Global Connectedness Report
  2. 2. Accenture (2023): Resiliency in the Making Report
  3. 3. Bloomberg (2024): Apple’s India iPhone Output Hits $14 Billion in China Shift
  4. 4. Lego (2022): The LEGO Group to build US$1 billion, carbon-neutral run factory in Virginia, USA
  5. 5. EY (2022): Why global industrial supply chains are decoupling