18 Must-Have Negotiation Skills For Procurement Professionals
Multiple Sourcing — The Ultimate Guide of 2023
Multiple sourcing is the new approach in outsourcing that many companies adopt nowadays. This is the result of the doubts about the effectiveness of having one provider meet the demand of the company.
For this article, we will talk about multiple sourcing. We will discuss its effectiveness in companies and how it differs from single sourcing. We will also explore its pros and cons when being used by companies.
After this article, you will have a better understanding of multiple sourcing’s growing popularity. You will know why many companies adopt this approach in their processes. With this being said, let’s start to unravel the things about multiple sourcing.
What is Multiple Sourcing?
In order to clear the confusion, let’s have a quick review of outsourcing. Outsourcing is the practice that companies use to acquire goods and services from third-party suppliers.
Outsourcing is usually used to reduce the costs of the company. Additionally, it adds specific expertise needed for a product or service without the requirement to invest more in in-house experts.
Now that we reviewed outsourcing, let’s now discuss what multiple sourcing is. Multiple sourcing or multi-sourcing is a type of outsourcing that is used by numerous companies.
Unlike traditional sourcing which deals with a single vendor, multi-sourcing makes use of numerous different vendors.
Typically, A company will handle some of the IT operations and outsource the rest of the other duties. The idea behind multi-sourcing is to make IT operations more effective in the process.
Through multiple-sourcing, a company can select the best possible vendor for a given IT task. By outsourcing other operations, the company can focus more on its most important duties internally.
When a company chooses the multiple sourcing approach, it must ensure that an in-house employee is monitoring the vendors. One of the best ways to find vendors is that you have a similar corporate culture.
What is Single Sourcing?
Single sourcing is a practice where you can select one supplier out of the numerous ones. The suppliers that you select provide the same products or services. Your requirements will determine who among the suppliers will suit your company best.
The company may also choose based on what it thinks it needs. It may choose the other as it has lower prices than the rest of the suppliers.
DifferenceBetween Multiple-Sourcing and Single Sourcing
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Challenges in Multi-Sourcing
1. Difficulty in maintaining supplier relationships
Multiple sourcing spreads its business across different suppliers. Its nature makes it challenging to manage all the suppliers effectively.
Multiple sourcing makes it difficult for companies to maintain relationships with their different suppliers. Having multiple suppliers that it all deals with simultaneously, companies must come up with a plan to manage them all.
2. More difficult to have control
The company may lose its control when many service providers manage its processes. An example would be companies cannot dictate the specific platform it uses to deliver products or services.
It is important that companies monitor their processes when many service providers engage with them.
3. Can potentially increase overhead costs
Multi-sourcing allows the company to source from numerous vendors to provide for its needs. When companies add more vendors, they may find themselves unable to manage all the relationships or services provided.
Multiple sourcing potentially increases the overhead cost by hiring more staff or being engaged with more third-party companies.
Advantagesof Multi-Sourcing
Multiple sourcing can benefit businesses that spread their demand across different suppliers. This is also necessary when a supplier cannot meet the total requirements of the organization.
Common advantages of multi-sourcing include:
- Decrease in relying on a single supplier that may run into difficulties due to uncertain events.
- Flexibility to cope with uncertain events that could harm the capacity and supply of goods or services.
- Decrease in bottlenecks because more suppliers are able to meet your demand.
- The competition of your different suppliers provides an incentive for them by improving their cost and services.
- The competition among your suppliers provides you with more bargaining power that allows you to save money.
- Allows the company to get the highest product and service quality due to the large pool of suppliers that you can access.
Frequently asked questions
+ What is multiple sourcing?
Multiple sourcing is an approach where an organization sources materials or services from many different suppliers.
+ What is the difference between multiple sourcing and single sourcing?
The main difference between multiple sourcing and single sourcing is the number of suppliers or service providers. Multiple sourcing can hire multiple suppliers while single sourcing ought to only choose one supplier among its potential suppliers.
+ What is a better approach between the two?
The best approach comes down to your organization’s size, product, and industry.
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