A risk/benefit analysis of sourcing strategies: Single vs. multiple sourcing

This study uses a risk/benefit approach to carefully examine sourcing strategies from the perspective of the purchaser, or vendee. Intensive interviews were conducted with purchasing and quality personnel at the Manager and Director levels within a number of large international organizations. The paper begins by describing the various definitions of single sourcing and the definition which is used for the purposes of this paper. Next, the factors which should influence managers’ sourcing decisions are identified and classified into five risk/benefit categories. These categories are then incorporated into a conceptual risk/benefit assessment model for managers to use in the evaluation of their sourcing strategy. The conceptual model is an adaptation of the additive rating model used for facility location decisions.