Welcome back to the NCA Ltd blog where we bring you the latest developments and insights from our company. In today’s blog we look at a pertinent issue that affects many suppliers and companies across the UK: Single Sourcing.
Single sourcing can be defined as “the result of a very conscious decision usually made by the Procurement or Purchasing department. Only one supplier is awarded business for a particular component, part or material even though there are other suppliers that can provide that same supply.” Indeed, single sourcing is an issue that has appeared in numerous articles recently – especially pronounced in the UK with both Brexit and the Covid-19 crises. According to a recent article on Insead Knowledge:
Globalisation of trade and decades-long innovation in supply chain networks have resulted in significant benefits for all stakeholders – greater efficiencies, lower costs, greater access to markets to name just a few. Yet, Covid-19 has exposed vulnerabilities in global supply chains. Dispersed supply chains offer more possibilities for shocks to penetrate and spread, and practices such as “just-in-time” and single sourcing can amplify shocks and lengthen recovery time.
Single sourcing thus exposes a company to market shocks and disruptions that can be easily avoided through the opening up of tenders and sourcing from various suppliers What’s more, the risks of single sourcing are not just amplified through global events. Single sourcing makes it harder for procurement to keep their company competitive and, in periods of tight supply, the buyer may be at a disadvantage in being able to ask other suppliers to accept orders. The impact of single sourcing can also be felt in the reputation of the company as other, equally able, suppliers may lose interest in trying to compete for the business if they see that a sole-source situation is likely to persist. Compounded by volatile world events, if the single supply does experience financial problems or is bought out, then there can be no guarantee that contracts will be fulfilled and that the supplier will have enough agility to navigate a new landscape in which they find themselves.
As a procurement officer, moving towards sourcing and finding a new supplier can look intimidating. However, through careful planning, research and both reviewing the performance of the incumbent supplier whilst exploring other options it is possible to create a strategy to start on-boarding potential new businesses and build new relationships.