Supply Chain Solutions No.18 – Single Supplier Sourcing
Some SME businesses globally rely on a single supplier to supply all their products. Due to their range of categories sold at wholesale and retail, it must be assumed the seller is an agent or trading company. While this allows the buyer to focus on their core competencies, it allows for considerable supply chain risk and possibly margin loss.
While outsourcing all vendor management through an agent or trading company can have its benefits as there is a sole point of contact that as a core business partner understands your business need, the negatives far outweigh the positives as the following examples;
- If the seller is no longer a viable partner to the buyer due to;
- price, quality or delivery issues
- relationship dispute
- the vendor becomes your competitor
- The buyer is no longer considered a major business partner to the seller.
- The buyer becomes reliant on the sellers pricing information which may not optimise margin.
- There is minimal traceability to manufacturing potentially effecting continuity of quality if the seller trades your business to various factories.
All points can potientially disrupt the buyer’s business with possible adverse effect.
Maintain a healthy supply chain by mapping vendors to categories; deploy a minimum of two vendors per category for risk and pricing management, schedule yearly or biyearly sourcing projects to develop redundancy plans and check pricing versus value and don’t have more than 40% of any single vendor’s capacity, ideally <20%.
Read more about developing a supplier matrix that can deliver supply chain flexibility; http://wp.me/p7z4o2-7y
ID Global Concepts are experts in supply chain management. We add value to your supply chain through consultancy or management contract to ensure the business has the best practice systems that are the right fit for your business, customer and meet your value expectations.