What are the four sourcing strategies, how do they work, and what are the advantages of each?
What will be an ideal response?
Answer: The main sourcing strategies are single, multiple, dual, and cross sourcing. In single sourcing, the firm depends on a single company for all or nearly all of a product or service, but in multiple sourcing, the firm shares its business across three or more suppliers. In between those ends of the spectrum is dual sourcing, where two suppliers are used for the same purchased product or service, and cross sourcing, where different business units in a single firm use different suppliers for similar parts.
Single sourcing has the advantages of volume leveraging, lower transportation costs, reduced quality variability, and stronger relationships with suppliers. Multiple sourcing creates competition, spreads risk, can help ensure that suppliers do not become complacent, may be required if the purchased volume is too great for one supplier, and may be desired if the buyer wishes to meet obligations to support minority suppliers. Dual sourcing accrues the same advantages as multiple sourcing as does cross sourcing.
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