10 Tips for Multi-Sourcing Products
Global multi-sourcing – in other words, obtaining identical products from more than one international supplier – requires weighing the qualitative and quantitative factors involved against what your company can reasonably support. Here are 10 tips to develop your multi-sourcing strategy.
Analyze your tolerance for risk. Assess the level of supply chain risk your organization is willing to accept, based on the likelihood of supply chain disruption for a particular item.
Determine the effect of not being able to obtain the product. This is closely related to the concept of risk, but adds a quantitative aspect to the analysis. For example, if a particular item is not available, what is the effect on revenue?
Establish whether other suppliers offer the same product at a comparable cost. Ensure that alternate suppliers can meet deadlines at an acceptable total landed cost, not just the product cost. These other charges to be considered include freight, insurance, duties and taxes; preferential trade programs; and countervailing or anti-dumping duties.
Make sure your alternative supplier won’t also be affected by the same factors that could disrupt your primary supplier. Choose suppliers from a different region, and use a different port of entry.
Institute a relationship program with your multiple suppliers. Be prepared to nurture the relationship with all your suppliers so they will want to come to your rescue in times of real need. You may want to pay a premium to guarantee availability.
Create an administrative structure to manage your suppliers. Establish a system that effectively stores supplier information that enables streamlined and easy sourcing decisions.
Accurately calculate landed costs. Products sourced from different suppliers have unique landed costs, since they will be coming from different countries.
Develop a regulatory compliance program. Each country has different import and export regulations. Agencies other than Customs may be involved, and each government has its own set of import filing forms. Make sure you have a system addressing all aspects of compliance.
Establish an international transportation management system. Getting your merchandise from source to destination is no small task, especially if regular trade routes are disrupted. Each shipment must be rated and booked, and multiple land and sea carriers will need to be managed and tracked.
Consider a global trade management (GTM) system. GTM enables you to inherently and intuitively address multiple sourcing at the product level. Look for a solution that allows you to store your supplier information in a centralized manner.