Procurement: Single Sourcing vs. Global Sourcing
Bad things will always happen. From shipping delays to factory mishaps, business will not always run smoothly. To have better control of unfortunate situations, you should take the time to understand the impact procurement has on your business. With Cristaux’s help, you can learn the differences between single source and global source procurement. Furthermore, you can decide with confidence what strategy is best for your organization.
What Is Single Source Procurement?
Single source procurement describes a company using one supplier to provide all the goods it needs for production. You can think of it like putting all your eggs in one basket.
The crucial advantage of single sourcing is being able to maintain a strong relationship with your supplier. Because of this, you will have a larger say in bargaining, pricing, and more. Trust and communication with your one vendor will be your greatest strength in this scenario.
The main disadvantage of single sourcing is being dependent on one supplier. You only have one option or one person to call. This will be detrimental to your business in times of emergencies. If their machinery breaks down or they’re short staffed, then they will take more time getting you your supplies. From there, the delivery times and fulfillment of your customer’s orders will delay as well, leading to dissatisfaction.
How do you find and maintain vendor relationships when single sourcing? Consider the following steps to better understand single source procurement.
How to Find Vendors
- Decide what you need supplied.
- Post a request for quote (RFQ) online, asking for suppliers who can provide what you’re searching for.
- Research the interested vendors. Look into their company history, years in business, reviews, and more.
- Decide who will be the best fit for the goods you need, the quantity needed, your price, and timeline.
- Continue to vet suppliers with additional questions to ensure which partnership will best benefit your business.
How to Maintain Supplier Relations
Maintaining relations with one supplier gives you the opportunity to develop a deeper relationship. Overtime, your vendor will trust you more, so you will gain bargaining power. Keep up open communication and watch your partnership grow.
What Is Global Source Procurement?
Also known as multi-vendor or dual sourcing, global source procurement entails working with multiple vendors to supply different needs. If single sourcing is like putting all your eggs in one basket, then global sourcing is like spreading out your eggs across many baskets.
By working with many suppliers, you run less of a risk to slow down business in case of an emergency. If one supplier can’t provide you with what you need, you quickly go to the next who can. This prevents disruptions in supply and order fulfillment delays. Global source procurement allows you many options to choose from so that you can coordinate back-up plans in times of emergency.
Additionally, you can better the quality of your product by comparing the supplies from different vendors. This form of quality control will only support the growth of your business. You have more time to better understand your vendors, their strengths, their weaknesses, and how they best complement each other.
When sourcing from multiple vendors, you will not have the same robust bargaining power as you would with single source procurement. Thanks to the time you’re absent between contacting vendors, a deep and trusting partnership is more difficult to form.
How do you develop global source procurement for your company? Consider the following tips when deciding if this is the right move for your team.
How to Find Vendors
Finding vendors for global sourcing is like the process for single sourcing. However, you focus on what vendors can best supply. Prioritize their strengths to better serve your company and deliver higher quality products.
How to Maintain Supplier Relations
Communication is complicated when it comes to global source procurement. You must maintain multiple relationships with different vendors. Also, your bargaining power is lower. This creates competition between suppliers, so it’s best to stick with those who are the best fit for your budget and timeframe.
How Sourcing Affects Your Program
The sourcing of your supplies has a large impact on your procurement, production, and sales efforts. It will determine how efficiently you can fulfill orders. Also, it will affect your pricing. Most importantly, you must maintain open communication between your departments, vendors, and channels to ensure timeliness and customer satisfaction.
How to Develop Your Procurement Strategy
When deciding your sourcing strategy, it’s critical to prioritize your needs. Consider the following steps to guide your sourcing plan.
- Identify your weaknesses. To find these gaps, reflect on your operations and capabilities. Where are you lacking materials? What is the best price for you? What do you need to focus on?
- Expand your list of vendors. To avoid disruption in business, find backups for your go-to suppliers. Then, find backups for your backups. To avoid headaches and frustrations, it’s best to have Plans A, B, and C ready to execute. Be prepared and have that extra support ready if needed.
- Diversify your market. Are you focusing all your efforts on one market? You may have multiple vendors, but if they’re all from the same country, you might be in trouble. If you have the resources available, expand your market to include suppliers from different countries and continents.
Is single source procurement a good or bad idea? Typically, single sourcing is risky because of the dependence on one vendor during times of emergency. However, some organizations need one specific tool or material that is only supplied by one vendor. This sole source procurement requires you to depend on that sole provider. Ultimately, identify your needs and find who best suits your vision.
Do What’s Best For You
Now that you understand the basics of global source and single source procurement, it’s time to reflect on what your company needs. In the end, it’s most important to put your business first. From budget to crisis to inventory, you want the best for your organization. You would do a great disservice to your mission and vision if you underestimate the importance of procurement.