Sourcing Methods and Their Practical Applications

13/08/2025 jessica Comments 0 Comment

Acting as a buyer, you have the flexibility to use the appropriate type of sourcing to achieve value for money in your purchases. According to the CIPS study guide, there are four common types of sourcing: single sourcing, sole sourcing, dual sourcing, and multiple sourcing. Each type of sourcing is well-suited to specific market conditions and purchasing objectives.

Single sourcing

In single sourcing, a company chooses to purchase from one supplier. Although there are some suppliers who are capable of fullfiling the business’s needs, the company prefer to source from a single supplier. When should a buyer choose single sourcing?

The supply risk is minimal or nonexistent.
Order quantities are very small and scattered. By placing orders with one supplier, they can increase the total value of their purchase in the eyes of the supplier. This enables them to negotiate more favourable terms and conditions for their companies.
When buying from a single supplier, the supplier is able to achieve economies of scale, allowing buyers to negotiate significant discounts for their orders.
There is a prominent supplier in the market who offer goods and services at competitive prices and exceptional quality.
The buying organization wants to build a partnership relationship to their supplier.

Sole sourcing

Many students misunderstand the difference between sole sourcing and single sourcing. Unlike single sourcing, sole sourcing refers to a situation where only one supplier is able to provide the required products/ services due to market regulation or patent restrictions. In this case, the buying organization has no alternative, but to buy from the only available supplier in the market.

In sole sourcing, the buying organization must carefully manage supply risks to avoid production disruptions and loss of sales. The bargaining power of buyers are quite low in sole sourcing, as the sole supplier is dominent in the market. Buyers can consider adjusting product specifications to attract additional suppliers, enabling them to leverage the market competition.

Dual sourcing

In dual sourcing, a company chooses to source the same products/ services from two suppliers. When should a buying organization apply dual sourcing?

The supplier risk is high, so buyers can manage that risk by purchasing from two supplier. If one supplier fails to fulfill orders, buyers can quickly turn to the other supplier to maintain supply continuity.
The purchased items are critical to the buying organization, and any delay in supply could result in major business losses.

Multiple sourcing

In multiple sourcing, a company relies on several suppliers to meet the full demand for a particular item. The maket offers a wide range of competent suppliers, and buyers can leverage this competition to negotiate the best deals. This type of sourcing is suitable for:

The market competiton is intense, and suppliers are driven to develop and innovate their core operational processes to offer outstanding value to buyers. Typically, the bargaining power of buyers is high compared to that of suppliers.
It is very important to maintain supply continuity.
Buyers do not intend to build long-term partnership with suppliers. Since switching suppliers may hinder the growth of the relationship, so multiple sourcing is more appropriate for non-critical supplier relationships.

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