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Diversification Strategies to Reduce Supply Chain Dependency Risks

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  • Lawrence, Alice

Abstract

In today’s volatile global economy, over-reliance on single-source suppliers or geographically concentrated supply chains exposes businesses to significant risks ranging from geopolitical disruptions and natural disasters to trade restrictions and pandemics. This paper explores diversification as a strategic approach to mitigating these supply chain dependency risks. Through an analysis of real-world case studies and recent academic research, we examine how firms in sectors such as automotive, pharmaceuticals, and electronics have implemented multi-sourcing, regionalization, vertical integration, and strategic inventory management to build more resilient supply chains. The findings suggest that while diversification involves added costs and complexity, it ultimately enhances operational agility and long-term stability. Moreover, we discuss the role of digital tools, such as supply chain mapping and AI-driven risk assessment, in supporting informed diversification decisions. By balancing cost efficiency with resilience, companies can better withstand unforeseen disruptions and maintain a competitive advantage in an increasingly uncertain environment. Keywords: supply chain risk, diversification strategy, multi-sourcing, resilience, supply chain management, dependency risk, global trade disruptions, supply chain resilience, procurement strategy, operational agility

Suggested Citation

  • Lawrence, Alice, 2024. "Diversification Strategies to Reduce Supply Chain Dependency Risks," OSF Preprints u2wej_v1, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:u2wej_v1
    DOI: 10.31219/osf.io/u2wej_v1
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    References listed on IDEAS

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    1. Md Maruf Hossan Chowdhury & Priyabrata Chowdhury & Mohammed Quaddus & Kazi Waziur Rahman & Sakib Shahriar, 2024. "Flexibility in Enhancing Supply Chain Resilience: Developing a Resilience Capability Portfolio in the Event of Severe Disruption," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 25(2), pages 395-417, June.
    2. Krishna Chaitanya Raja Hajarath & Jayapal Reddy Vummadi, 2024. "Enhancing Supply Chain Resilience: Proactive Strategies for Disruptive Events," International Journal of Supply Chain Management, IPRJB, vol. 9(3), pages 1-11.
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