If the average person wasn’t sure what a supply chain disruption was before, the Great Toilet Paper Shortage of 2020 put the spotlight on it. We’re now four years on and the disruptions just keep on coming. As a procurement professional, you’re more acutely aware than most of the havoc that supply chain disruptions can wreak and you know how important it is to have a supply chain that’s resilient, flexible, and responsive. In this blog post, we take a look at some of the ways your organization can ensure supply chain continuity, even in the most tumultuous times.
If the last few years have taught us anything, it’s to expect the unexpected – and not keeping all of your eggs in one supply basket is an increasingly appealing strategy to boost supply chain resilience. As such, there’s a growing trend among leading organizations to move away from single sourcing and switch to a second- or even multi-sourcing strategy.
The idea behind this approach is to reduce the risks associated with depending solely on one supplier. If the primary supplier is facing challenges, businesses can quickly pivot to an alternative source, ensuring uninterrupted operations and safeguarding against possible disruptions, such as adverse weather, material shortages, natural disasters, and geopolitical tensions.
According to experts at McKinsey & Co., large companies usually lose the equivalent of two quarters of profit every decade as a result of supply chain disruptions - and a 100-day supply disruption (which is not unheard of) can easily wipe out 30% to 50% of one year’s EBITDA. Considering this, it pays to be prepared for all eventualities by having a plan B - or even C or D - in place.
Before we get to the positives, let’s take a look at some of the challenges you might encounter when implementing second- or multi-sourcing.
Specialization: The more customized the component, the harder it may be to find suppliers who can produce it.
Insufficient resources: Finding and vetting extra suppliers, and dealing with the related contracts and maintaining relationships, takes time and manpower that many organizations just don’t have.
Loss of control and/or quality: With more supplier relationships to oversee, it can be difficult to maintain control over production and logistics. Additionally, many organizations worry that they won’t be able to control quality across multiple suppliers so they choose to stick with the tried and tested option.
Increased costs: Adding a new supplier can create extra costs - for example, using more stringent quality or safety controls on components produced by the new supplier.
The good news is that the advantages of second- or multi-sourcing almost always outweigh the disadvantages. Here are some of the main benefits you can expect:
In short, single sourcing might have worked for organizations during periods of predictable supply and demand but, in today’s chaotic landscape, its drawbacks are increasingly coming to the fore. As a result, many organizations are now embracing second- or multi-sourcing strategies to reduce risk and maintain flexibility during uncertain times.
Scoutbee serves as the primary scouting tool for procurement teams, and can help you find new, quality suppliers in a fraction of the time. If you’re looking to reduce costs, improve service, increase production, or simply ensure that your supply chain is robust enough to withstand disruptions, our AI-powered solution is the answer to your prayers.
To see how we can help you find additional suppliers, be it for standard or highly customized components, all over the world, request a demo today.