Sole sourcing & single sourcing: What is the difference?
It is important for all procurement and supply chain operations to appreciate the differences between single sourcing and sole sourcing as a buying strategy.
What is single sourcing?
Single sourcing is a deliberate choice made by businesses to decide on a particular supplier, even when alternative options are available. This decision may come up for various reasons, such as the buyer's pre-existing relationship with the supplier or the supplier's outstanding reputation and consistent track record.
One drawback of this approach is the potential inability to cultivate deeper supplier relationships. It may not provide businesses with the same peace of mind that comes from working with well-established suppliers known for their consistent performance and product quality.
In contrast to sole sourcing, single sourcing offers numerous advantages, primarily because it empowers procurement teams. With single sourcing, procurement teams retain control, enabling them to explore better alternatives in case of underperformance by current suppliers and to effectively negotiate favourable terms and conditions.
What is sole sourcing?
Sole sourcing is a procurement strategy where businesses exclusively rely on one supplier for a particular product or service need. This approach can have advantages as it reduces risks and streamlines costs by minimising the number of supplier relationships to manage.
The method comes with a particular drawback, as it results in limited options should the current supplier face financial troubles or suffer issues with the quality of their performance. In certain scenarios, businesses resort to sole sourcing because of a lack of alternative suppliers. This arises when a single dominant supplier possesses a specialised level of expertise, proprietary technology, or offers a product or service that is difficult to replicate by other vendors.
If the sole supplier encounters problems related to production, quality control, or financial stability, it leaves the company vulnerable to disruptions in the supply chain. Sole sourcing can also stifle competition, potentially leading to reduced innovation and less competitive pricing.
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