Procurement Glossary
Dual sourcing: definition, strategies and application in Procurement
November 19, 2025
Dual sourcing is a strategic procurement approach in which companies deliberately use two suppliers for the same product or service. This method reduces dependencies, increases security of supply and creates scope for negotiation. Find out below what exactly dual sourcing means, how it works and what benefits and risks are associated with it.
Key Facts
- Dual sourcing uses exactly two suppliers for identical products or services
- Reduces delivery risks by up to 60% compared to single sourcing
- Enables continuous price comparisons and negotiation advantages
- Requires more management effort than single sourcing
- Particularly suitable for critical materials and strategic components
Contents
What is dual sourcing?
Dual sourcing refers to a procurement strategy in which companies deliberately select two suppliers for identical products, materials or services and use them in parallel.
Key features of dual sourcing
The strategy is characterized by several distinctive features:
- Exactly two active suppliers per product category
- Allocation of order quantities between the two partners
- Continuous performance evaluation and comparison
- Flexible volume distribution depending on requirements and performance
Dual sourcing vs. other sourcing strategies
Compared to single sourcing, dual sourcing offers more security, while it is less complex than multiple sourcing. The strategy combines risk minimization with manageable management costs.
Importance of dual sourcing in Procurement
Dual sourcing plays a central role in modern procurement strategies. It supports security of supply and at the same time enables continuous cost optimization through competition between suppliers.
Procedure: How dual sourcing works
The successful implementation of dual sourcing requires a structured approach and clear processes.
Supplier selection and qualification
The first step involves the careful selection of suitable suppliers. Both partners must meet comparable quality standards and have similar capacities.
- Carrying out a comprehensive market analysis
- Evaluation of supplier capabilities and capacities
- Examination of geographical and technological diversification
Quantity allocation and contract design
The strategic distribution of order quantities is based on defined criteria such as performance, costs and risk assessment. Typical splits range from 50:50 to 70:30.
Performance monitoring and control
Continuous benchmarking between the two suppliers enables data-based decisions on quantity distribution and performance optimization.
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Important KPIs and targets
Measuring the success of dual sourcing requires specific key figures that cover both operational and strategic aspects.
Delivery performance key figures
Key metrics for evaluating supplier performance include delivery reliability, quality rate and response times. These are continuously compared between the two partners.
- On-time delivery rate (OTDR) per supplier
- Quality index and complaint rate
- Flexibility with quantity changes
Cost efficiency indicators
The cost assessment is based on the total cost of ownership (TCO) and takes into account transaction and management costs as well as purchase prices.
Risk minimization metrics
Special KPIs measure the effectiveness of risk reduction through dual sourcing, including security of supply and default probabilities.
Risks, dependencies and countermeasures
Despite its advantages, dual sourcing involves specific risks that can be minimized by taking appropriate measures.
Increased complexity and costs
Managing two suppliers requires more resources than single sourcing. Higher transaction costs and more complex coordination can impair efficiency.
- Standardization of communication processes
- Use of digital platforms for supplier management
- Clear definition of responsibilities
Information security and confidentiality
Working with two suppliers increases the risk of information leaks and makes it more difficult to protect business secrets.
Quality fluctuations between suppliers
Different quality standards can lead to problems in production. Regular acceptance criteria and uniform specifications are essential for minimizing risk.
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Practical example
An automotive manufacturer implements dual sourcing for critical electronic components. The company selects a German and an Asian supplier to ensure both cost benefits and security of supply. Quantities are initially split 60:40, with the German partner being preferred due to shorter delivery distances. Through continuous benchmarking, the company is able to reduce prices by 12% and at the same time increase supply reliability to 99.2%.
- Selection of complementary suppliers with different strengths
- Flexible volume distribution based on current performance
- Regular performance evaluation and adjustment of the strategy
Current developments and effects
Dual sourcing is constantly evolving and is shaped by new technologies and market requirements.
Digitalization and AI integration
Modern technologies are revolutionizing dual sourcing management. AI in Procurement enables automated supplier evaluations and optimized quantity distributions based on real-time data.
Sustainability and ESG criteria
Companies are increasingly integrating sustainability criteria into their dual sourcing strategies. This leads to a more conscious selection of suppliers and an increased focus on regional partners.
Supply Chain Resilience
The COVID-19 pandemic has increased the importance of supply chain resilience management. Dual sourcing is increasingly being used as a crisis prevention tool, with geographical diversification gaining in importance.
Conclusion
Dual sourcing is a balanced procurement strategy that combines security of supply with controllable complexity. The method is particularly suitable for critical materials and enables continuous cost optimization through supplier competition. Successful implementation requires a structured approach, clear KPIs and digital support. In an increasingly volatile business world, dual sourcing will gain in importance as a strategic instrument for minimizing risk.
FAQ
What is the difference between dual sourcing and multiple sourcing?
Dual sourcing is deliberately limited to exactly two suppliers, while multiple sourcing involves three or more partners. This reduces complexity and management costs, but offers less diversification than multiple sourcing.
When is dual sourcing the optimal strategy?
Dual sourcing is particularly suitable for critical materials with medium to high procurement volumes, where security of supply is more important than maximum cost reduction. It is ideal for standardized products with several qualified suppliers on the market.
What is the best way to allocate quantities between suppliers?
Quantity distribution is based on performance criteria such as quality, delivery reliability, price and flexibility. Typical splits range from 50:50 to 80:20, depending on strategic objectives and current supplier performance.
What are the costs of dual sourcing?
Additional costs include higher transaction costs, extended quality assurance, more complex logistics and more intensive supplier management. These are often compensated for by a better negotiating position and reduced default risks.
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