Rethinking Supplier Diversification in a Disrupted World

In an era of unprecedented disruption, punctuated by semiconductor shortages, geopolitical tensions and beyond, supply chain resilience has become something of a business imperative. 

But achieving true resilience requires more than reactive measures. Instead, it demands a fundamental shift in how manufacturers approach procurement, supplier relationships and data-driven decision-making.

The challenge facing procurement professionals today is striking the delicate balance between cost efficiency and long-term stability. Supplier diversification strategies must be weighed against digital investments, while traditional metrics focused solely on price are no longer sufficient. Organisations must embrace end-to-end visibility, foster genuine partnerships based on data sharing and leverage technology to anticipate risks before they materialise.

In a recent webinar hosted in association with Amazon Business, Ashley Naughton, Head of Supply Chain at NTT DATA UK&I, and Martin Corner, Executive Director of Supply Chain Management at Aston Martin Lagonda, explored these evolving dynamics and the importance of supplier diversification.

How can procurement teams in manufacturing improve supply chain visibility given today's vulnerabilities?

Ashley: Procurement has a massive role to play in driving resilience and transparency. I think there's actually much more ambiguity between procurement and supply chain functions now. Having the vision to look at what outcomes drive value to the business is critical.

When procurement is starting to look for sources of supply and engage with the market, it needs to think proactively about things which will drive differentiated outcomes – like ESG and sustainability – which historically haven't been as important.

Martin: In the purest sense, procurement can't do that alone anymore. What's become clear is that the full end-to-end value chain setup is what allows companies to de-risk their supply chains. You need to think about sourcing footprints, lead times, ESG requirements, tied-up capital and geopolitical risks.

Whether you call it supply chain or procurement, that end-to-end view of all the levers and factors needs to be taken into account when you set up the value chain to build resilience as well as achieve cost and cash efficiency.

What digital tools are helping uncover blind spots in the supply chain?

Martin: The semiconductor crisis exemplified that the traditional, one-dimensional relationship between automotive OEMs and first-tier suppliers is out of the window. Supply chain illumination – understanding how the second, third, or tier-N supply base maps out and the various risk points along that chain – is crucial.

We've realised that traditional, mainframe MRP systems are out of the window. We need to invest in more scientific, digital solutions that not only focus on demand but trigger alerts through the supply chain when issues occur, whether it's flooding, the Suez Canal closure or disruption in a country where the raw material comes from. 

Ashley: I honestly believe that a well-integrated, average solution will always outperform a non-integrated, best-in-class solution, because it's how the business chooses to act on those curated insights that delivers value. The data's vitally important, the insight enables decisions, but how you act on those insights is what drives the value.

Understanding what data you acquire and the connectivity into your data ecosystem is where it all lies. The right solution can solve problems across the organisation – procurement might focus on cost and inflationary risk, while supply chain worries about delivery disruption. Through central orchestration, you can unlock value across the enterprise.

How crucial is real-time data for risk mitigation?

Martin: It's becoming more crucial. In the past, we relied on logistics providers to alert us – often you'd only find out when a truck arrived at a supplier and what should have been loaded wasn't there.

We're getting better through relationship management, but the next phase is implementing tools embedded in our working systems. At the moment, we're still relying on our partners to trigger alerts, but we're well down the line in considering an embedded system that gives us alerts on financial risk, geopolitical situations, weather – you name it.

Ashley: If you're sourcing components from Asia, you've likely got six to seven weeks of stock either in the warehouse or on the water – about two months of stock in transit to make decisions.

The earlier you get a risk notification, the better. If technology using natural language processing picks up a risk in a Mandarin article two weeks earlier than you would've otherwise known, you might gain two or three weeks of reaction time on top of your existing inventory. That speed and insight really makes a difference in protecting the business.

Where should manufacturers begin when looking to diversify their supply base?

Martin: The car industry has been going through intellectual somersaults on this. Traditionally, we've gone single-source for core commodities because tooling costs are such a big investment.

The question has been: how do we analyse which commodities to consider diversifying and localising? At Aston Martin, we're a very different beast: very low-volume, very high-value cars. When you consider the total cost of acquisition and trade off higher piece prices against lower logistics costs, less tied-up capital, lower lead times and less need to discount cars built without customers, it changes the equation.

We could increase the piece price by double-digit percentage points and it's still end-to-end lower cost than taking the low-cost solution with a long lead time and higher-risk supply chain.

Ashley: Different industries have different opportunities. In automotive, the investment in tooling makes it extremely difficult or prohibitive to dual-source.

It's also about the specialism of components. These tend to be more medium to strategic decisions around localisation of supply. But for risks and threats that emerge quickly, you just can't react with resourcing in discrete manufacturing environments. T

he most beneficial thing you can do is get information and alerts as early as possible. That's the biggest value in driving short-term resilience.

What really defines a strategic supplier relationship?

Martin: I sometimes wonder about the textbook answer, because there's a commercial relationship that can break down at points of stress. It works where the needs of both parties are equally balanced, and that's rarer than we think.

At Aston, we either have very bespoke suppliers doing technical solutions where there's a symbiotic relationship or we're dealing with massive companies like Bosch where our volume is tiny in their context. A true partnership comes from situations where the risk of failure is equal to both parties, so the success of both parties is intertwined.

If that balance isn't there, there's a commercial relationship with uneven power distribution.

Ashley: Most of us talk about partnerships quite loosely, but what we really need is true partnership where there's recognition by both parties of dependency. That dependency really matters. This is a supply network, an ecosystem where everyone is required to deliver value to the end client. We all fall over unless we work that way.

The simple way to tell if you've got a partnership is to ask: how much data do you share with one another? Do you share technical data, capacity information, risks proactively, quality concerns? Those are the indicators that tell you if you've got something different, something that's not just transactional.

What's the secret to balancing cost with long-term resilience?

Martin: If that trust is there for the long term and you're sharing information and data and working in partnership, I believe that's the best way to drive out real end-to-end cost from a supply chain. You'll have resilience because you've got trust in the relationship and, over time, you get the best end-to-end cost.

My approach has always been one of curiosity – let's break down how the cost of this part is structured and what we can do together to remove cost. I'm happy for the supplier to make a fantastic margin if the end cost to us is better. That relationship, dependency, trust and information sharing gets the best blend of cost and resilience.

Ashley: There's a fundamental need for manufacturers to revisit how they measure value. For far too long, we've had experts speak about resilience and sustainability, but there's a lack of value-driven metrics that demonstrate this to the C-suite.

Businesses don't measure resilience and the value that comes from preventing events from repeating. The KPIs that organisations hold themselves to are often the wrong measures and that has to change. People need to look at the supply chain not as a cost centre, but as a strategic growth engine.

What advice would you give procurement and supply chain professionals heading into 2025?

Ashley: Organisations need to consider the use of technology. Choose the right technology that has access to the right data ecosystem; map the availability of data to your business needs and use cases across the enterprise. Then, get support on how to integrate it into the business to ensure you deliver the value you want. Approach technology wisely and assess it against your needs.

Martin: Don't just think price – think end-to-end total cost of acquisition and think business connection for the whole value chain. That's where we become value drivers and not just cost and price managers.