The argument tends to be conducted in principle, which is why it never resolves. Procurement points to volume leverage and lower administrative cost. Operations points to the day the single supplier failed. Both are describing real effects, and the answer differs by component rather than by policy.

The Genuine Case For Single Sourcing

Concentrated volume buys better pricing, and the gap can be substantial on high-spend items.

It also buys relationship depth. A supplier with all your volume for a component invests in the relationship, prioritises you when capacity is tight, and engages on development in a way a split-volume supplier won’t. That priority position has real value during shortage.

And it reduces cost you don’t see: qualification, auditing, quality management, and administration all multiply per supplier.

The Genuine Case For Dual Sourcing

Continuity, obviously. But also competitive tension — a supplier who knows an alternative is active and qualified prices differently from one who knows they’re the only option.

And capacity flexibility. Two suppliers give you headroom to absorb a demand increase that either alone would struggle with.

How to Decide, Per Component

Four questions, in order.

What does a stoppage cost per week? If the component stops your highest-volume line, this number is large and dominates everything else. If it delays a low-volume product with a tolerant customer, it doesn’t.

How long would substitution take from a standing start? A commodity available from twenty suppliers has a substitution time of days and doesn’t need pre-qualification. A component requiring tooling, qualification testing, and customer approval might take a year — and for that one, dual sourcing is effectively mandatory regardless of price.

What’s the price penalty for splitting? Get the actual number by asking for quotes at both full and partial volume. It’s frequently smaller than assumed, particularly where the supplier values a stable base more than the marginal volume.

How correlated are the alternatives? Two suppliers sharing an input, a region, or a sub-tier source aren’t independent. This check gets skipped constantly and undermines the whole exercise when it does.

Options Between The Extremes

It isn’t binary. A qualified but dormant second source — approved, tested, receiving occasional small orders to keep the relationship live — gives you most of the continuity benefit at a fraction of the split-volume cost. The occasional orders matter: an alternative you haven’t bought from in three years is a name, not a supplier.