Sourcing diversification is one of those topics where the theory is simple and the practice is very hard. The theory is that a business with too much of its supply coming from one origin or one carrier is exposed to shocks that it cannot absorb. The practice is that moving supply to new origins or new carriers costs money, breaks relationships, and takes time that the business usually does not feel it has.
A four step playbook
- Step one, map the current flow honestly. Where does the material really come from. Who really carries it. What is the actual share of volume and the actual share of margin that sits with each origin and each carrier. Most businesses discover in this step that the concentration is worse than the internal reporting had suggested.
- Step two, test alternative origins on three axes at once. Cost, transit time, and risk. A new origin that is cheaper and faster but sits inside the same political risk envelope is not a diversification. It is a relabel.
- Step three, stress test the new footprint against the shocks that have already happened in the past three years. If the firm cannot survive those shocks, the plan is not resilient, it is optimistic.
- Step four, sequence the move. The new origin is qualified before the old origin is wound down. The transition period is longer than leadership wants it to be and shorter than the risk team wants it to be. The playbook writes down the transition period in advance and refuses to move the date without a written note.
What a resilient footprint looks like on paper
A resilient cross border footprint usually has no single origin above a stated share of volume, no single carrier above a stated share of volume, and a named second source for every class of material the business cannot run without for more than a few weeks. The stated share is agreed between the commercial, operations, and risk teams in writing, and it is reviewed every year. The review has the power to move the share.
A playbook that is not agreed in writing, by name, by the three teams listed above, is a playbook that will quietly fail the first time a real shock arrives.