Both 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.
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 on our blog.