Single or multi supply?
Choosing whether to go for single or multi supply is a crucial decision when developing a supply chain strategy. Both strategies have advantages and disadvantages.
Although working with multiple suppliers makes the supply chain more complex, it also offers protection from certain risks. Your ideal supply chain strategy will depend in large part on finding a compromise between these two issues.
Advantages of using a single source of supply
A single supplier strategy makes the commitment to buy a specific resource only from that one supplier. Business owners may benefit if the provider is dependable and well-suited. For instance:
- Building a relationship with one provider is simpler than doing so with several
- A collaborative approach might foster trust and mutual gain.
- Costs could decrease as a result of scale
- It could be simpler to integrate systems if you just order from one source.
Disadvantages of single supplier strategy
If your supplier’s activities are disrupted, relying on single sourcing puts you at risk of not being able to receive crucial supplies. The following are typical downsides of this tactic:
- increased supply vulnerability
- higher possibility of supply disruption
- increased reliance between your company and the provider
You can run into problems if you only buy from one supplier and they disappoint you, go out of business, or can no longer match the demand.
Some suppliers may be motivated by exclusivity to provide you with greater service, but others may become complacent and lower their standards. This can occur in asymmetrical dependency situations, when the buying firm becomes more dependent on the supplier than the other way around.
Advantages of using multiple sources of supply
Businesses that wish to distribute demand among a variety of suppliers who collectively have higher capacity and are more buyer-responsive may find that the multiple sourcing strategy is advantageous. Additionally, it is essential when one supplier is unable to satisfy all of the demands of the purchasing organisation, as is the case, for instance, when a product contains numerous components that no one provider is able to manufacture.
Typical advantages of multi supplier are:
- Less reliance on any one source acting as a backup in case of difficulties
- Greater adaptability to deal with unforeseen circumstances that could endanger capacity
- More providers able to handle peak demand, resulting in fewer bottlenecks
- Competition frequently serves as a motivator for suppliers to raise prices and quality of service.
- Additionally, the customer frequently gains additional negotiating power due to rivalry among providers.
Disadvantages of multiple supplier strategy
Multiple supply sourcing may benefit dependency, flexibility and capacity, but it can complicate supplier relationships and require greater resources to manage them. As supplier numbers grow, the price tag often goes up and the following drawbacks can occur:
- Information exchange might get trickier
- Greater fees for managing contracts and carrying out processes
- Reduced volume of orders lower the bargaining position
- Savings potential from economies of scale is diminished
- Issues with effectiveness and quality control can arise.
When it comes to selecting suppliers, smaller firms typically have less freedom than larger ones. If you’re thinking about using numerous supply sources, you should weigh the possible drawbacks of this approach against the dangers of supply disruption that could result from working with only one supplier.
When choosing a supplier, don’t forget to take into account all other pertinent factors.
Concentrate your efforts on selecting and managing strategic suppliers who offer products or services that are vital to your company. Both parties stand to gain from a solid connection.
How does single or multi supply impact Fleet?
- How does the overall supply shortage affect the pros and cons?
- How does the ever increasing alternative products affect the pros and cons?
- How does pandemic experience impact the fleet strategy, fleet size and desire for a mobility driven solution and affect?
There are a number of interconnected elements in you fleet DNA and strategy that heavily affects the impact of each of the above bullets. Such areas are:
- Your EV strategy, status of roll-out and outlook
- The composition of your fleet: passenger cars vs vans vs trucks
- The regional coverage and fleet size by country
- Your procurement, mobility, and HR strategies
- The cars to employees ratios
And although this overview is not pretending to capture it all, it does show that a generic answer to the question “Single vs Multiple suppliers strategy” cannot be given. Fleet360 is here to help you ask internally and externally the right questions to help you come to the right conclusion that fits the needs of your company best.