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