Multiple Sourcing vs Single Sourcing

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Presented by Samarth Gulati and Shefali Srivastav of FMG-18A, FORE School of Management

Text of Multiple Sourcing vs Single Sourcing

Multi Sourcing vs Single Sourcing

S a m a rth G u l ti9 1 0 4 7 a S h e fa l ri sta va 9 1 0 5 0 iS va

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 S o u rci ng

Multip le Sourci ng

HIGH

LOW

SUPPLY RISK

LOW

HIGH

FINANCIAL IMPORTANCE

Need for Single Sourcing

Need for Multiple Sourcing

Multiple Sourcing vs Single SourcingMultiple 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 Fords 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. Philipss 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