Managing Risks of Supply-Chain Disruptions: Dual ... - CiteSeerX

The most adapted approach (single Vs. multiple sourcing) depends on many parameters such as themarket structure, the type of products or the cost structure. One factor that is often used is based onsourcing costs. When there are high indirect costs, single sourcing is recommended as highinvolvement with a single supplier permits to reduce these expenditures. On the contrary, whenthere are low indirect sourcing costs, multiple sourcing and competitive bidding is more adapted toreduce prices. Figure 3.1 illustrates this segmentation.M ultiplesuppliersPriceIndirect costsTotal costsSingle supplierPriceIndirect costsTotal costsSource: “Supplier Relations”, Wynstra, F., (2001), TechnischeUniversiteit EindhovenFigure 3.1: Single or Multiple Sourcing – Price vs. indirectMore generally, the supplier structure must be aligned with the general principles of the purchasingstrategy that has been chosen. To illustrate this point, let’s consider Kraljic’s portfolio that defines4 types of commodities, which lead to differentiated purchasing strategies. The segmentation ispresented on Figure 3.2.27