Procurement Glossary
Dual-sourcing ratio: definition, calculation and strategic importance
November 19, 2025
The dual sourcing rate is a key performance indicator in strategic procurement management that measures the proportion of procurement volumes for which at least two suppliers are available. This key figure shows how well a company is protected against delivery failures and how flexible it is in negotiations. Find out below what exactly the dual sourcing ratio means, how it is calculated and what strategic advantages it offers.
Key Facts
- Measures the percentage of the procurement volume with at least two available suppliers
- Reduces dependency risks and strengthens negotiating position with suppliers
- Typical target values are between 60-80% of the total procurement volume
- Requires continuous market observation and supplier development
- Balances risk minimization with cost efficiency and complexity management
Contents
What is a dual sourcing quota? Definition and classification
The dual sourcing ratio quantifies the diversification of the supplier base and serves as an important indicator of security of supply.
Basics and calculation
The dual sourcing ratio is calculated as the ratio of the procurement volume with at least two qualified suppliers to the total procurement volume. Both active and potential second sources are taken into account.
- Formula: (volume with ≥2 suppliers / total procurement volume) × 100
- Evaluation according to material groups and strategic importance
- Consideration of supplier capacities and qualifications
Dual sourcing quota vs. single sourcing
In contrast to single sourcing, where only one supplier is deliberately selected, dual sourcing aims to spread risk. While single sourcing enables cost benefits and closer partnerships, a high dual sourcing ratio offers more flexibility and supply risk management.
Importance of the dual sourcing quota in Procurement
The KPI supports strategic decisions on supplier portfolio design and enables a data-based assessment of supply security. It helps to identify critical dependencies and prioritize supplier development measures.
Process steps and responsibilities
Systematically increasing the dual sourcing rate requires structured processes and clear responsibilities between Procurement, quality assurance and supplier management.
Analysis and evaluation of existing supplier structures
The first step involves the complete recording of all procurement categories and their current number of suppliers. Dependency risks are identified and prioritized according to their strategic importance.
- Categorization according to ABC analysis and strategic relevance
- Evaluation of existing supplier capacities and qualifications
- Identification of single-source positions with high risk potential
Market analysis and supplier identification
Systematic market research to identify potential second sources, including the evaluation of supplier capacities, quality standards and geographical distribution. Tier N transparency plays an important role here.
Implementation and monitoring
New suppliers are qualified step by step, taking cost-benefit ratios into account. Regular review of the quota and adjustment of the sourcing strategy based on market changes and risk matrix evaluations.
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Important KPIs and target figures for dual-sourcing quotes
Measuring and managing the dual sourcing rate requires a system of key figures that take both quantitative and qualitative aspects into account.
Primary performance indicators
The dual sourcing rate itself is the main indicator, but should be considered in a differentiated manner using additional key figures. Typical target values vary between 60-80% depending on the industry and risk appetite.
- Total dual sourcing rate (target value: 70-80%)
- Category-specific dual sourcing quota according to strategic importance
- Number of qualified alternative suppliers per critical item
Risk and quality indicators
Supplementary indicators evaluate the quality of the dual sourcing strategy and its effectiveness in minimizing risk. The integration of early warning indicators enables proactive action.
Efficiency and cost ratios
The balance between risk minimization and cost efficiency is measured by specific KPIs. These include the additional costs due to dual sourcing, supplier development costs and the amortization period of investments in second sources. Buffer stock costs can be reduced through effective dual sourcing strategies.
Litigation risks and countermeasures for dual-sourcing quotes
The implementation of a high dual sourcing rate entails specific risks that must be minimized by means of suitable measures.
Complexity and coordination risks
Managing multiple suppliers per category increases operational complexity and can lead to coordination problems. Unclear responsibilities and inconsistent quality standards are frequent consequences.
- Standardization of supplier evaluation and management processes
- Implementation of standardized quality management systems
- Clear definition of roles and responsibilities
Cost risks and economies of scale
Splitting volumes among several suppliers can lead to higher purchase prices due to reduced economies of scale. Additional costs arise from extended supplier support and development. An effective risk mitigation plan is required.
Quality and performance risks
Differing quality standards and performance levels between suppliers can lead to inconsistencies in supply. Credit checks and continuous monitoring of supplier financial health are crucial for minimizing risk.
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Practical example
When analyzing its procurement structure, one automotive supplier identified a dual sourcing rate of only 45%. The dependence on a single supplier for electronic control units, which accounted for 15% of the total procurement volume, was particularly critical. Through systematic market analysis and supplier development, a second qualified supplier was established within 18 months. The implementation was carried out step by step with an initial 20% volume share for the new supplier. At the same time, a contingency plan was developed for the transition to enable a rapid shift in volume in the event of supplier failure.
- Increase in the dual sourcing rate from 45% to 72% within two years
- Procurement risks reduced by 35% according to internal risk assessment
- Improved negotiating position led to 8% cost savings
Current developments and effects
The importance of dual sourcing has increased significantly due to global supply chain disruptions and geopolitical tensions, necessitating new approaches and technologies.
Digitalization and AI-supported supplier analysis
Artificial intelligence enables a more precise evaluation of potential second sources through automated market analyses and risk assessments. Machine learning algorithms can predict supplier performance and recommend optimal dual sourcing strategies.
- Automated supplier identification and evaluation
- Predictive analytics for supplier default risks
- Real-time monitoring of the dual sourcing rate
Nearshoring and regionalization
The trend towards regional diversification is leading to a reassessment of dual sourcing strategies. Companies are increasingly looking for local or regional second sources in order to reduce transportation risks and geopolitical risks.
Sustainability and ESG criteria
Environmental, social and governance factors are increasingly being integrated into dual sourcing decisions. This requires an extended assessment of potential second sources in terms of their sustainability performance and supply chain resilience.
Conclusion
The dual sourcing ratio is an indispensable key figure for modern procurement management that makes security of supply and negotiating strength measurable. Systematically increasing the ratio to 60-80% significantly reduces dependency risks and strengthens the strategic position of procurement. Companies must strike a balance between risk minimization and cost efficiency, supported by digital tools and data-based decision-making processes. Continuous monitoring and adjustment of the dual sourcing strategy remains crucial for sustainable procurement success.
FAQ
What is a good dual sourcing ratio?
A good dual sourcing ratio is typically between 60-80% of the total procurement volume. The optimal value depends on the industry, risk appetite and specific market conditions. Critical material groups should have a higher ratio than less strategic categories.
How do you calculate the dual sourcing rate?
The calculation is made by dividing the procurement volume with at least two qualified suppliers by the total procurement volume, multiplied by 100, taking into account both active and potential second sources that can be activated within a reasonable period of time.
What are the costs of dual sourcing?
Dual sourcing can lead to higher purchase prices due to reduced volume discounts. Additional costs arise from supplier development, extended quality assurance and more complex logistics processes. These additional costs should be weighed against the risk reduction and improved negotiating position.
When does single sourcing make sense despite the risks?
Single sourcing can make sense for highly specialized products, very small volumes or strategic partnerships with high innovation potential. Single sourcing may also be justified for suppliers with exceptionally high reliability and if the costs of dual sourcing would be disproportionately high.
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