Multi Sourcing vs Single

Sourcing

S a m a rth G u la ti9 1 0 4 7
S h e fa liS riva sta va 9 1 0 5 0
 Problems in Supply Chain
• Disruptions: natural disasters,
strikes, terrorism attacks
• Uncertainty
• Vulnerability
• Complexity
 What should be done
• Build a resilient supply chain
• Prepare the firm against disruption
• respond to uncertainty effectively
• secure the supply-chain
S in g le  Multip
S o u rci le
ng Sourci
ng
HIGH
SUPPLY RISK

LOW LOW HIGH

FINANCIAL IMPORTANCE
Need for Single Sourcing
Need for Multiple Sourcing
Multiple Sourcing vs Single
Sourcing
Multiple Suppliers

PRICE INDIRECT COSTS

Single Supplier

PRICE INDIRECT COSTS

 Ford Case
 In 1998, supply problems at Ford
resulted in the temporary, three-day
shutdown of the Fiesta and Puma
manufacturing facilities in Cologne and
Dagenham, Germany.


 The source of the supply problem was a

computer glitch at Ford’s provider of door
and trunk latches.


 Those three days cost Ford

approximately £70 million in labour costs
and the production of about 7000 vehicles.
 Ericsson vs Nokia
• Philips suffered a fire in its plant of Alburque in
march 2000.
• Philips’s site became unable to produce the
computer chips that its customers, Nokia and
Ericson, needed to produce mobile phone
handsets.
• Nokia realized very early that there was a
problem in the production of chips, and
pressured Philips to reroute capacity.
• Ericsson detected the problem slowly and when it
turned to Philips, it was too late as Nokia had
already claimed all the production.
• The damages were very important for Ericsson as
Philips was its only supplier:
Conclusion