Advantages Of Multi Sourcing

BENEFITS AND LIMITATIONS OF ADOPTING SINGLE SOURCING AND MULTI SOURCING.

What is purchasing

Purchasing is an activity which links the focal firm to its external network. It is ‘responsible for obtaining, by purchase, lease, or other legal means, equipment, materials, supplies and services required by an undertaking for use in production.’ (Lysons 1996)

What is single-sourcing

‘Single sourcing is the practice of obtaining the same type of product, component or service from a single supplier’. (Slack et al, 2010)

What is multi-sourcing

‘Multi-sourcing is the practice of obtaining the same type of product, component or service from more than one supplier in order to maintain market bargaining power and continuity on supply’. (Slack et al, 2010)

• It enhances information exchange because of better communication.

• Bargaining power and benefits from economies of scales reduce costs.

• Dealing with one supplier means less administrative cost. There will be no need for a review of bids from additional suppliers and negotiation or renegotiation of contracts are lesser, reducing excessive paperwork on purchase orders. Overall, it will be easier with accounts and payment.

• Should a question arise about product quality, it would be easier to track down the source of the problem.

Limitations of single-sourcing

• Disruption in operations is likely to occur if the supplier becomes inefficient or fails in producing orders as needed. For instance, if there is a shortage of livestock from The Farmers Market, and they are unable to provide as demand arises, interruptions negatively impact the supply chain performance.

• In periods of low supplies at the restaurant, asking other suppliers to accept orders may be

Multi-sourcing promotes innovation, where competitiveness is prominent in the service industry.

• This approach enables bargaining power as the restaurant is in a better position to analyse and negotiate price and service levels.

• As demand increases, multi-sourcing provides various options because the organisation can determine the efficiency and quality of products and/or services from an array of suppliers, rather than one sole supplier. This strategy provides flexibility because suppliers are putting their best foot forward to fulfil the demands of the company; improving efficiency and increasing agility.

• Examining the dependability and flexibility of the suppliers simultaneously reduces overall cost and the organisation adapts to what works best for them.

• While the current relationships are impersonal, new relationships are established, giving the organization a good chance of networking and increasing the chances of dealing with experts, who can provide absolute quality services. Long-term partnerships can then be developed for the benefit of the