Single-Source Risk and a Multi-Sourcing Strategy
Buying a part from a single supplier can look simple and cheap in the short term; but when that supplier runs out of stock or raises the price, your production is left exposed. In this article we cover single-source risk and why multi-sourcing is critical.
What is single-source risk?
Single-source risk is depending on only one supplier or manufacturer for a part. A stockout, price increase, quality problem or EOL situation at that supplier can directly halt your production. The risk is highest when the part is critical and has no alternative.
What is multi-sourcing?
A multi-source strategy means identifying at least one approved alternative source (a second distributor or an equivalent part) for every critical part. You have a plan B that kicks in when one source fails; this both increases your negotiating power and reduces the risk of disruption.
How do you build a multi-source strategy?
- Identify critical parts and define an alternative source/equivalent for each.
- Where possible, prefer parts available from multiple manufacturers with a second source.
- Regularly scan your BOM for single-source items.
The difference between a second source and an equivalent
Multi-sourcing is achieved in two ways. A second source is supplying the same part (the same MPN) from a different distributor; it's the easiest method. An equivalent (alternative part) is a functionally equivalent part from a different manufacturer and usually requires verification. An ideal strategy uses both: multiple distributors for the same part, and an approved equivalent.
Multi-sourcing at the design stage
The strongest form of multi-sourcing is built at the design stage: choosing critical parts from components available from multiple manufacturers with standard packages from the very start makes finding an alternative much easier later. Choosing a niche, single-manufacturer part structurally locks you into a single source.
Frequently asked questions
Does multi-sourcing increase cost?
Although it takes a bit more effort in the short term, it saves in the long run by preventing disruption and emergency-purchase costs.
Is a second source required for every part?
No; the priority is critical, single-source and long-lead parts. For abundant standard parts the risk is low.
How do I find a second source?
By comparing a part's different distributors and equivalents, you can identify approved alternative sources.
Conclusion
Multi-source procurement is the strongest insurance for production continuity. To see all of a part's sources, use the comparison tool; to identify an alternative, the cross-reference tool; and to scan risky items, the BOM tool.