dualsourcing

Dual sourcing is a procurement strategy in which an organization sources the same component or service from two different suppliers. The objective is to reduce reliance on a single supplier, increase forecast reliability, and provide resilience against supplier outages, quality issues, or capacity constraints. Dual sourcing is distinct from single sourcing, where all demand is placed with one supplier, and from multi-sourcing that uses more than two sources for a component or service.

Implementation typically begins with identifying critical spend items and assessing supplier risk, dependence, and capability. Conditions are agreed in advance on allocation of orders (for example, 50/50 or risk-based splits), lead times, quality regimes, and price mechanisms. Contracts often include service level agreements, change management, and exit or ramp clauses to reallocate volumes if performance changes.

Benefits include reduced risk of supply disruption, improved resilience, and potential for supplier competition to improve performance. It can also provide capacity flexibility and protect against supplier-specific events. Costs include higher procurement and administrative overhead, potential quality variation, accounting and logistics complexity, and possible dilution of economies of scale.

Limitations include higher total cost of ownership, management overhead, and reduced leverage for price concessions if volumes are split. Not suitable for low-value commodities where risk is minimal, or for highly integrated, proprietary components that require sole sourcing or common design ownership.

Industries that use dual sourcing include manufacturing, electronics, automotive, aerospace, and consumer products, especially for critical components or spare parts. Successful dual sourcing relies on clear governance, robust supplier qualification, and ongoing performance monitoring to ensure continuity and quality.