1.2 Differentiate between approaches in the sourcing of requirements from suppliers

Question 1

Single sourcing

Answer 1

Choosing to source from one supplier

Question 2

Monopoly

Answer 2

A situation where one supplier has the entire market share and there is no competition.

Question 3

Sole sourcing

Answer 3

A situation where only one supplier for the required item is available.

Question 4

Dual sourcing

Answer 4

Sourcing from two suppliers

Question 5

Multiple sourcing

Answer 5

Sourcing from many suppliers

Question 6

What factors relate to different sourcing approaches?

Answer 6

Category of product/service
Quantity of product/service
Supplier relationship
Supply and demand
Skill of procurement professional
Organisation culture

Question 7

Three types of sourcing arrangement

Answer 7

• Single
• Dual
• Multiple

Each approach related to a chosen procurement strategy.

Question 8

In what circumstances would you have a single source arrangement?

Answer 8

• There is a monopoly supplier and the buyer has no choice (sole sourcing)
• Economies of scale can be achieved
• Order quantities are very small
• One supplier offers outstanding value for money against the competition.

Question 9

In what circumstances would you have a dual sourcing arrangement?

Answer 9

• There is a risk of one supplier not being able to supply

- A product/service is critical to an organisation

Question 10

In what circumstances would you have a multiple sourcing arrangement?

Answer 10

• Supplier competition is vast
• Supplier relationship is not critical
• Constant supply is critical

Question 11

What supplier relationship does a single sourcing approach require?

Answer 11

Partnerships or strong collaborative relationships.

Question 12

What supplier relationship does a dual sourcing approach require?

Answer 12

These must be strong and should be collaborative (strategic alliance).

Question 13

What supplier relationship does a multiple sourcing approach require?

Answer 13

These are not critical so style is more transactional.

Question 14

Public sector

Answer 14

A sector of the economy that provides services to the people and is funded through taxes

Question 15

Open tendering

Answer 15

The opportunity is widely advertised, allowing any supplier to make a bid

Question 16

Advantages of single sourcing arrangements:

Answer 16

Maximum leverage
Strong relationship
Strong commitment
Good communication
New product development
Innovation
Confidentiality
High trust
Economies of scale
Cost effective

Question 17

Disadvantages of single sourcing arrangements:

Answer 17

Risk of failure to supply
Price may inflate with no competition
Restricted options
Over-reliance on supplier

Question 18

Advantages of dual/multiple sourcing arrangements

Answer 18

Easy to drive down cost
Switching suppliers is easier
Wide knowledge and expertise
Low risk of failure to supply

Question 19

Disadvantages of dual/multiple sourcing arrangements

Answer 19

Transactional relationship
Lack of supplier commitment
Lack of economies of scale
No supplier loyalty

Question 20

The tendering process

Answer 20

Planning, initiation (tender), award, contract, implementation

Question 21

Three types of tender approach

Answer 21

• Open
• Negotiated
• Restricted