Multi-Sourcing

Multi-sourcing is an approach whereby an enterprise chooses to procure a certain component/ material from multiple, different suppliers. The advantages and risks of multi-sourcing depend on a product’s Bill of Materials (BOM), complexity, and the unique material availability. Multi-sourcing can have numerous supply chain risk factors associated with it due to the involvement of many independent suppliers in different locations, each with their own propensity to disruption. Since business volume per transaction is lower for each individual supplier, there is less incentive for the supplier to analyse its own efficiency and bottlenecks, thus increasing performance risks to the buying company. As opposed to single sourcing, overseeing a multi-sourced supply chain can require further supplier relationship management in order to reduce risk of disruption. The most important advantage of multi-sourcing is that it allows for enterprises to have alternate suppliers when a particular supplier faces a disruption. Multi-sourcing helps mitigate supply risks and reduces a buying company’s reliance on one supplier. It also helps reduce inherent supply chain risk of demand variability, as demand is spread across numerous suppliers that together would collectively have more capacity and be more responsive to the buying company. Many businesses utilize multi-sourcing to foster competitive bidding among suppliers, which can provide pricing advantages.