What is dual sourcing?
Dual sourcing is the supply chain management practice of using two suppliers for a given component, raw material, product or service. The term dual sourcing is often used outside its strict definition to be synonymous with multi sourcing, which can be more than two. Companies use this approach to lower the risk of relying on a single supplier, a practice called single sourcing. Sole sourcing, in contrast, means only one source is available.
Dual sourcing (as well as multi sourcing) can be an important supply chain risk management strategy for many companies, because relying on one supplier can be risky. Weather that affects crops, shortages of materials, recalled products, natural disasters and political unrest are just a few of the potential supply chain risks that prompt companies to consider dual sourcing.
Dual sourcing can also help a company grow because having more than one supplier can help ensure a company is able to keep up with increasing customer demand. Shortages, for whatever reason, can negatively affect production and result in lost revenue.
Dual sourcing can also pose risks, however, including inconsistent quality. The complexity of dual sourcing can be challenging for manufacturing resource planning systems and other software systems that companies use and may require more strategic sourcing technology to help companies source from multiple suppliers.