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Dual Source vs. Single Source


PurchTips - Edition # 134

By Charles Dominick, SPSM

 

Should You Dual Source Or Single Source?

To dual source means to use two preferred suppliers to provide the same product or service. To single source means to use just one preferred supplier, despite there being multiple capable suppliers available.

Many purchasers decide to single or dual source prior to issuing an RFP or tender based on certain assumptions. Common assumptions are that there is a lower cost with a single source due to you leveraging your volume but less risk with a dual source due to having a qualified supplier up and running if the other fails to perform.

Those assumptions may be right sometimes but, as a professional, you should make decisions on facts, not assumptions. To acquire facts, request three prices from your suppliers: (a) for 100% of your business, (b) for 70% of your business, and (c) for 30% of your business.

Upon bid receipt, compute the cost of doing business with the two qualified suppliers who bid the lowest for the 70% and 30% chunks of your business. Compare that cost with the lowest qualified single source bid. Is there a cost difference between the single and dual source options? If so, does the lower risk justify the premium?

I must close this article with these caveats:

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www.NextLevelPurchasing.com/spsm.html

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