Single Sourcing vs Multiple Sources for Custom Manufacturing

single manufacturing sourcing vs multiple manufacturing sourcingBoth sides of this issue have emerged in our efforts to help buyers with suitable candidates for manufactured items. We’ve worked both sides—insistence on a sole source as well as finding competitors for a multiple source situation. So we have thoughts on the subject and hope you will offer additional ones in the comments below.

First, a single source success story: we were asked to find a sole source for an automotive project. The project began because the tier 1 customer sought a replacement for a poorly performing single source. Our mission was to give the buyer candidates and ultimately recommend the best alternative. We found 15 companies, forwarded 6 candidates, and eventually settled what became a unanimous decision as to which was the best. It has worked out productively for the past 6 years—and counting—with 2-3 million parts per year!

Single sourcing entails some risk, and the buyer needs to be very careful. In our case, the tier 1 company went through a very thorough examination of our recommended suppliers before PPAP’s or initial demonstrations of manufacturing. The buyer’s examination included financial history, facility visits, equipment capacity and company history with similar type products and customers. When the supplier is relatively local this becomes much easier for all.

As a consequence the buyer and supplier have a comprehensive and collaborative relationship, with frequent communications encouraged. New parts are submitted via RFQ’s, with target pricing indicated. The relationship is such that engineering details, manufacturing methods, and pricing can be discussed back and forth, and in each case a satisfactory conclusion has been reached. The experience has been absent any consequential quality issues and all shipments have occurred in a timely manner.

The value to the buyer in such a case is intensive supplier care to ensure the customers are getting exactly what they want—always. We recently read a Linkedin group discussion of sole sourcing where the single source cited apparently forgot this, which is exactly the circumstance that gave our candidate the opportunity in the first place.

So we have experience with a sole sourcing project that has worked out very well for all. On the other hand, dealing with multiple sources is more common, and especially when the parts to be sourced are relatively simple and sophisticated certifications are not required.

We sometimes consider bidding on government (DOD) work, but know that regardless of how good our performance is, the next bid opportunity for future work will be offered to everyone. No apparent consideration is given to successful prior suppliers. This seems to be standard DOD practice, and probably contributes to the reluctance of small companies to compete for government work. If you are interested in competitors for your government projects, we are interested in working with you. We’ve had successes with this category of sourcing as well.

One excellent reason for multiple sources is to ensure a suppliers’ business failure or financial difficulty doesn’t result in supply difficulties to buyers. It may be that small company buyers simply don’t have the resources to fully investigate the financial strength of a new supplier. Or the candidate is small enough to be vulnerable to economic factors that would not be so difficult for a larger company.

Another compelling rationale for multiple sources is to ensure supply flow regardless of circumstances at one supplier. If the buyer’s business is relatively small, there is always the concern that bigger customers will command priority so as to create an interference with the buyer’s deliveries.

We also find an almost standard buyer practice to have multiple suppliers for most situations. Most of the time this is to protect against surprise supplier problems and also to provide surplus capacity.

Whatever your situation is, we’re ready to address your needs.

This subject is certainly more complicated than our short discussion, and we invite you to contribute your thoughts.

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