Find Cost Savings by Moving From a Single Source to a Multisource Procurement Strategy
As we enter the final calendar quarter of what has been a tumultuous year, many companies need to cut costs to get budgets back on track. Ideally, finance and procurement teams can start with cost savings that do not affect the quality of operations. One way to find that balance, and perhaps even improve operations, is to move from a single source to a multisource procurement strategy.
At times, a single source strategy may seem simpler. After all, with only one source, no time has to be spent deciding which supplier to work with at a given time. Yet a multisource procurement strategy allows companies to:
- Compare CostsIf you only purchase from one supplier, you may not have much of an idea what similar procurement would cost from another supplier. Even the exact same item can have different costs among different suppliers.
For example, in your personal life, you would likely compare car prices among different dealerships in your area to see who can offer you the best deal. The same should be true when sourcing items like office supplies. Having a multisource strategy can allow you to efficiently compare costs to find the best price. And since prices can change over time, having multiple vendors already onboarded can help you continue to make quick cost comparisons. When car shopping, you might also find that another car brand offers a better deal than the one you initially considered. Similarly, a multisource procurement strategy can help you identify vendors with similar yet lower-cost products and services. For example, you might solicit bids for cleaning services from multiple vendors. The service details and quality may not be exactly the same, but you can at least weigh the costs with the details of what each bid offers.
- Evaluate ContractsWith a multisource strategy, finance and procurement teams can also evaluate contracts among different vendors. Doing so can help you agree to better terms. For example, with a single source strategy, you might come to assume that Net 15 payment terms are what you have to use. Yet if you have a multisource procurement strategy, you can compare different payment terms. Some might offer Net 30. From there, you could either choose the vendor with the better terms or use this knowledge to negotiate a better contract. Similarly, a multisource strategy can help you compare contract terms like shipping speeds. These types of details may not yield immediate cost savings, but they can make a difference in the long run. If you need IT equipment, for instance, receiving that quickly could help employees do their jobs better. If they had to wait due to the contract terms from a single source, they might not have the tools they need to be productive. So there can be an opportunity cost there. Difficult procurement terms could also be a source of frustration for finance and procurement teams. If that hurts morale, there could even be turnover cost.
- Build ResilienceA multisource strategy also helps build resilience in the event something goes wrong with one vendor. For example, particularly during the early days of the COVID-19 pandemic, many supply chains were strained. Having a multisource strategy, especially one with suppliers located in different regions, may help companies get the products they need on time. That way, companies don’t have to overpay for things like expedited shipping once the single source vendor is back to full speed. Plus, delays can lead to long-term costs or decreased revenue, such as if they hurt employee or customer experience. Before the pandemic, a BDO survey conducted in the fall of 2019 found that many U.S. manufacturers faced challenges from international tariffs and sanctions. To minimize the impact of these disruptions and potential added costs, companies can build a resilient supply chain, with multiple suppliers located in different areas of the world.
Build a Multisource Strategy With a Procurement Partner
Moving from a single source to a multisource procurement strategy can help you save money both now and in the future. However, not every company can dedicate the time needed to source multiple suppliers, vet them and onboard them.
Working with a partner like GoProcure can help. In addition to using our e-procurement platform to gain access to a wide range of products and services, our Strategic Sourcing services can help you develop a custom multisource strategy according to your needs. Plus, our proven tollgate process typically results in around 5-15% cost savings.
Request a free consultation with our product experts today to learn more about how GoProcure can help you build resilience in your supply chain.