Name: Sunil Mohan

Student Id: A00115915

Assignment 2

Q.1 Explain the use of diversifying suppliers and service providers,

ensuring the following in the process of mitigating risk:
I) Supplier quality II) Multi-sourcing III) Insurance IV) Legal advice

Diversifying suppliers and Service providers

There are various opinions on how many suppliers a company should rely on for its
raw materials, parts, and MRO assets (maintenance, repair and operation). Some feel
that working with a small group of suppliers over time, helps them make better use
of their suppliers and helps companies benefit from better prices, contract terms,
customer delivery and attention. On the other side of the spectrum, there are buyers
who would prefer to work with a large retailer pool, betting that the needs of their
organization will be met every time they “distribute the wealth” among those diverse
retailers. Over time, many companies have developed a strategy that falls between
the two extremes: relying on a small pool of retailers or growing up with a very large
group of other retailers. With prices, trade wars, and partial shortages all taking place
in the supply chain, mass acquisition strategy can be dragged down as companies
work to ensure they get the things they need to make their products.

Risk Mitigation Strategy

Today's global supply chains are shrinking and depleted more than ever before,
leaving a high risk of unforeseen, both man-made and environmental disasters and
establishing an effective risk mitigation strategy for these inevitable threats are
essential to global market markets. The risk in supply chain arises from a number of
areas, as well as natural disasters, war acts or acts of terrorism, supplier fraud, theft,
damage and breach of information. In the most recent study, more than 75% of
companies reported at least one supply chain disruption in the last twelve months.
And one in five left the business at intervals in eighteen months Following are the
areas where diversifying suppliers and service providers helps to mitigate risk:

(I)Multi-sourcing

Multi-sourcing is an outsourcing approach where companies evaluate contracts from

various suppliers, which helps them reduce the risk of shortages for any reason.
Contrary to popular belief, multi-sourcing enable consumers to distribute their
purchases to multiple suppliers. In this way, there is less risk tied to the performance
of each vendor. Consumers with a variety of supply chains are less likely to be
affected if a few providers arrive at difficult times.
With more access, consumers get the best features for a single find and variety. They
can build long-term relationships with a few vendors at a time and also vary to
protect against supply issues. In addition to putting all their eggs in one basket or a
very small distribution, companies can add lean supply chains with decent backups
that can fill the gap, if needed.

In highly competitive spaces for supply shortages, multi-sourcing have clear

advantages. Companies may set up relationships with suppliers that guarantee
certain production capacity in the event of any concerns from early vendors. In other
words, this is a variation without incurring administrative costs or problems
associated with actively managing multiple provider relationships. The wide range
of options within the supply chain also means a great opportunity to analyze the cost,
location, and scope of the available assets if you choose the best ones.

(II) Supplier Quality

Supplier quality is the supplier's ability to deliver goods or services that will satisfy
the needs of customers. Supply quality management is defined as a system in which
the quality of a provider is managed through an efficient and collaborative approach.
It is in the interest of the organization to ensure that its service or material providers
provide the highest quality products and services while also complying with pre-
established requirements. This is usually achieved through the use of a supplier's
quality management service that allows companies to monitor supply chains and
inspect or evaluate operational services from time to time.
The supplier has the power to tarnish the company's reputation because if the
supplier does not maintain a certain quality it will affect the company's reputation
directly or indirectly. Therefore, Diversification frees you from the tyranny of
accepting whatever the parent company offers. If you are diverse, you may choose
the best brands for each segment of your sale rather than accept low-end products or
services in the name of efficiency and cost savings. A diversified provider base also
allows access to a wide pool of talent, which encourages innovation.

Provider quality management begins at the beginning of the product design and
process of supplier selection. It persists throughout the product life cycle and the
period of relationships with different suppliers. Diversification helps to reduce
quality risk in the early stages by providing a wide range of high-quality service
options and saving time and money for the company.

(III) Insurance

Insurance coverage is available for certain purchase risks. For example, business
interruptions caused by a fire in a leading supplier may be covered by other suppliers
if the company has a diverse network of suppliers. Diversification helps a company
to reduce the risk of non-existent assets in the event of any uncertainty arising from
their regular supplier. It also serves as insurance if for some reason such as strikes
somewhere your regular supplier is unable to provide the goods where the company
can reach out to other suppliers for the continued supply of different products. Also,
for other reasons such as road accidents, the driver of the supplier’s company is
missing, etc., then also different suppliers help to keep things in perspective.

(IV) Legal Advice

The state of global supply chain continues to change rapidly. This poses new
challenges for all businesses seeking to manage their purchases and legal issues
while expanding their business to a global level. Initially, when a business tries to
increase their operational area they do not know what kinds of legal problems are
and also don’t know how to handle them but if they have a large network of suppliers
then some experienced suppliers can give them some kind of legal advice to deal
with those problems. This is because the company does not know all the existing
laws of each country and dealing with different suppliers can help to overcome it.
Diversification also helps them to consider the various aspects of contractual law
and their application to the supply chain management function and what happens
after the contract is formed - the obligations of each contracting party and legal rights
in the event of non-compliance. It also helps them while working with the basic
requirements of contract construction and enforcement and reduces the risk of
entering into voluntary contracts. In addition, it also reduces the risk of underlying
contractual obligations and increases confidence in securing contractual rights. It is
therefore essentially diversification to help the company become acquainted with
service providers and various legal aspects that affect its obligations.

References

https://www.sourcetoday.com/supply-chain/article/21867328/using-
multisourcing-to-diversify-the-supply-chain

http://resources.inboundlogistics.com/newsletter/UPSC_tentips_0116.
html

https://www.supplychaindigital.com/supply-chain-2/feature-
diversifying-supply-chain