Advantages of Dual-Sourcing Your Supply Chain for Electronic Parts

Remember when COVID was a thing, and all your component orders were late? That wasn’t fun. For some of us, it’s still not fun.

The shift by electronic parts buyers in the 2020s to dual-sourcing their supply chain needs has been largely in response to COVID and other global events. While some business owners believe fewer vendors equals better terms and service, many OEMs are waving the white flag and ditching exclusive agreements.

Why Are Supply Chain Managers Dual-Sourcing Components?

What are the benefits of finding a few extra procurement paths in today’s global market? Look around you – and at the past 5 years.

The big ones are:

1. Stability
2. Competition
3. Business growth
4. Quality
5. Geographic diversification
   
   

1. A More Stable Supply

Diversifying your avenues can reduce the risk of shortages due to spikes in demand or production issues with your current electronic component supplier. 

How many times have you checked one of these off on your “bad market news” bingo card since 2020?

• Raw material shortage
• Geopolitical tensions
• Natural disaster
• Tariff escalation
• Plant fires or shutdown
• Trade embargo

Overdependence on one supplier to get you through the tough times means those tough times will hit you harder.

Think of the B2B electronic component supply chain like NFL stadiums on the outskirts of huge cities. Most of the year, the roads are busy, but manageable. When it’s gameday or Taylor Swift is in town, you’re suddenly sharing the road with thousands more people than usual.

Can you imagine how long it’d take fans to reach the stadium if there was only one, single-lane road into the city?

Stability in sourcing is crucial to keeping production lines running interruption-free. It also keeps your component pricing from suddenly spiking.

2. Competition Among Friends

Isn’t leverage great? Leverage is what you get when suppliers are aware they’re not the sole source of procurement.

The advantage of promoting competition between multiple sources is that you end up the winner. You may see better:

• Prices
• Service agreements
• Product quality

Over time, you’ll learn which suppliers perform the best in delivery speed and product quality. This allows you to make more informed decisions for future orders.

3. Business Growth

Got grand dreams? Dual-sourcing can also help with business growth. 

Having two or more parts suppliers allows you to keep up with growing customer demand and one-off spikes. A single manufacturer – especially a smaller one – may struggle to meet these immediate and long-term needs in a timely manner, if at all.

Furthermore, dual-sourcing gives you the flexibility to test new markets without overburdening your primary supplier. You can get strategic without worrying about the (literal) little things that could stagnate your big ideas.

4. Continuous Quality Improvement

A multisourcing strategy means freedom of choice.

If the quality of work from, say, a terminal block supplier deteriorates, you can quickly shift to another manufacturer. In other words, you don’t have to let their problem become your problem. You’ll also find manufacturers that specialize in producing awesome terminal blocks, and might wish to source those parts from them instead of a jack-of-all-trades supplier.

Having multiple sources in supply chain management also grants you freedom to innovate.

Different suppliers may offer unique technologies or advanced solutions that can enhance your own product's competitiveness or efficiency. A multi-stream approach gives your engineers license to find creative design solutions.

5. Geographic Diversification

Sourcing from suppliers in different places on the map can reduce the impact of region-specific disturbances. These include:

• Extreme weather
• Labor strikes
• Regulatory changes

Depending on your operation, a broader network may also decrease freight and other logistical costs. Simply put, you can source electronics closer to where you need them, and probably at a shorter lead time.

Are There Risks in Multisourcing the Electronic Parts Supply Chain?

Sure, there’s no perfect answer to getting the perfect part, every time, in the exact quantity and price you desire. Potential risks of dual-sourcing components are:

• Trickier to manage: Handling logistics, two or more contracts, and communication across suppliers takes time and attention to detail. One way to alleviate this is using an advanced ERP system.
  
  
• Overhead costs: Managing several relationships comes with more overhead than a single-supplier relationship. This includes administrative burden and more frequent contract negotiations.
  
  
• Quality issues: If you don’t pay attention, your recipe could be one for disaster. When you work with multiple suppliers with varying standards, getting consistency across all components can be challenging. Integrating unstandardized parts from different suppliers into the same design can turn your end products into a bad batch.

By giving supplier orders and relationships a little TLC, all of these risks are avoidable. For most company types and sizes, the benefits of dual-sourcing still outweigh the potential downsides.

Plus, there’s one trick up your sleeve you can always play: a distribution partner. With access to dozens – if not hundreds – of top suppliers, a distributor (assuming it’s reliable itself) can bridge the benefits of multisourcing and single-sourcing.

More Electronic Component Sourcing Tips

The electronic component sourcing process as you know it died in 2020. Yet many companies that make or use electronic products continue to use the same-old strategies for finding parts.

Transitioning to a multisourcing component procurement process can help you:

• Avoid disruptions
• Drive down costs
• Meet your standard of quality, consistently

Evaluate and select the right component suppliers based on the right criteria – for your company, those are probably quality, cost, track record, and technical capabilities.

For more expert advice on the do’s and don’t’s of electronics sourcing, download our free e-book: