What sourcing arrangement is typically used when supplier competition is extensive?

Multiple sourcing is an arrangement where a buyer engages with more than one supplier for the same product or service. This approach is especially effective in environments where supplier competition is high, as it allows the buyer to leverage the competitive landscape to secure better pricing, improved quality, and enhanced service levels.

When supplier competition is extensive, multiple sourcing is advantageous because it not only mitigates risks associated with dependency on a single supplier but also encourages suppliers to maintain competitive pricing and innovation. Drawing upon a diverse supplier base can lead to better negotiation positions and assurance of supply continuity, as the buyer is not reliant on a single entity, reducing vulnerability to disruptions.

In contrast, single sourcing tends to concentrate risk and limits options, while dual sourcing involves only two suppliers, which may not provide enough competition. Collaborative sourcing, while fostering partnerships and joint ventures, often entails fewer suppliers and may not fully capitalize on the competitive dynamics present in a market with many players.