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Multiple sourcing: definition & important aspects for buyers
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Multiple sourcing creates security: 65% fewer production-critical delivery failures and a shortened replenishment time of 40-50% in the event of delivery bottlenecks in the automotive supply industry
Multiple sourcing in a nutshell:
Multiple sourcing describes the strategic procurement of a product or service from several different suppliers in parallel. This strategy enables purchasing to minimize supply risks and strengthens the negotiating position by reducing the degree of dependency on individual suppliers.
Example: A car manufacturer obtains 40% of its battery cells for electric vehicles from a Korean manufacturer, 35% from a Japanese manufacturer and 25% from a Chinese manufacturer, enabling it to continue production without interruption in 2023 despite supply bottlenecks at one of its main suppliers.
Contents
What is multiple sourcing?
Multiple sourcing refers to a procurement strategy in which a company purchases similar goods or services from several suppliers. This approach aims to minimize risk management, increase security of supply and achieve competitive advantages through better prices and conditions. In contrast to single sourcing, multiple sourcing reduces dependence on individual suppliers and strengthens the purchasing department's negotiating position.
Core elements of multiple sourcing
Significance for purchasing
Multiple sourcing is of great importance in strategic purchasing in order to ensure security of supply and optimize costs. By working with several suppliers, purchasing can realize price advantages and improve the quality of the procured goods. It also makes a significant contribution to risk management by minimizing the impact of supplier failures or problems.
The protection provided by multiple sourcing is proven by figures
The implementation of multiple sourcing as a strategic procurement strategy has a significant impact on company performance. While the additional administrative effort typically increases process costs by 10-15%, the positive effects clearly outweigh this: automotive manufacturers report a 15% reduction in production costs through supplier diversification and optimized development partnerships. Order cycles are shortened by up to 20% thanks to digitalized supplier portals.
The risk minimization is particularly noteworthy - companies that use multiple sourcing reduce production-critical delivery failures by an average of 65% and shorten the replenishment time in the event of delivery bottlenecks by 40-50%. The strategic distribution of procurement volumes - typically 40/35/25 with three suppliers - enables a balance between risk diversification and efficient supplier management. Studies show that companies can strengthen their negotiating position through multiple sourcing and thus realize price advantages of 8-12%, while at the same time quality standards rise by an average of 25% due to increased competition.
Multiple Sourcing: From Traditional Procurement to Strategic Supplier Management
Based on the theoretical foundation of multiple sourcing, the practical application of this strategy is becoming increasingly important in modern procurement. Whereas in the past companies often relied on a small number of suppliers, today's dynamic market landscape requires a diversified supplier base. The need to spread risks and leverage competitive advantages is leading to a transformation from the traditional approach to a more strategic procurement management.
Old: Traditional multi-supplier procurement
Traditional approach: In traditional multiple sourcing, products and services were procured from several suppliers, but without in-depth strategic considerations. The selection of suppliers was often mainly based on short-term price advantages. There was a lack of close cooperation and transparent communication, which led to inconsistencies in quality and delivery times. In addition, administrative costs increased due to redundant processes and a lack of standardization.
New: Strategic Sourcing
Strategic sourcing: The modern approach of multiple sourcing, known as strategic sourcing, integrates procurement as an essential part of the corporate strategy. Supplier relationships can be optimized and synergies created through the use of digital technologies and data analysis. Companies evaluate suppliers not only according to cost, but also according to criteria such as innovative ability, sustainability and risk exposure. This leads to long-term partnerships, improved security of supply and increased added value.
Practical example: Automotive industry
A leading automotive manufacturer used Strategic Sourcing to optimize its supply chains. By implementing a digital supplier portal, real-time data was exchanged, resulting in a 20% reduction in order cycles. Diversification across several strategic suppliers in different regions minimized the risk of production downtime. In addition, joint development projects with suppliers reduced production costs by 15% and introduced innovative materials that reduced vehicle weight and increased efficiency.
Conclusion on supplier evaluation through multiple sourcing
Multiple sourcing is proving to be an essential procurement strategy for modern companies. Spreading procurement across several suppliers not only reduces supply risks, but also strengthens the negotiating position and enables flexible reactions to market changes. Despite the increased coordination effort, the advantages of risk diversification and security of supply outweigh the disadvantages. Careful supplier selection, efficient relationship management and standardized processes are crucial for successful implementation.
