What Is Single Sourcing? (With Advantages and Examples)

By Indeed Editorial Team

Published April 26, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

When businesses want to purchase specific goods and materials, they may choose the single-source model for their operations. Choosing to have a single supplier can help save costs and get exclusive materials that may set the business apart from its competitors. Understanding the single supplier model and its benefits may help you decide when to use it in the workplace. In this article, we discuss what single sourcing is, outline its advantages, compare it with sole sourcing, and provide examples of its applicability in different industries.

What is single sourcing?

Single sourcing refers to a situation where a business purchases all its materials, products, components, and parts from a single supplier, even if other suppliers can provide the same materials. Managers may choose to use a primary supplier if it offers the company a strategic advantage. Professionals such as internal sourcing, purchasing, supply, and budget managers help optimize the process. Businesses can also use this system as a hiring strategy for specific tasks. For example, if the company has a large office building, it can hire a commercial cleaning agency to sterilize and clean the building regularly.

Lower costs, bidding, and quotation processes are factors that make companies choose to use a single supplier. The process typically involves reviewing different candidates before selecting one. Other factors to consider include:

  • Unit pricing

  • Quality

  • Delivery benefits

  • Operating terms and conditions

  • Contractual discounts

  • Reputation

  • Brand partnership benefits

  • Business commitments

  • The existing relationship between the supplier and company

  • Expertise

Related: 9 Supply Chain Management Degree Jobs (With Salaries)

Advantages of the single-source model

Here are some of the advantages of purchasing materials and resources from a single supplier:

Better accountability

One of the advantages of a single-source supplier is its accountability, as they're single-handedly responsible for the delivery and supply processes. If there are any delays or complications, they bear all the responsibility. This sense of responsibility ensures efficiency and effectiveness when delivering resources.

Channel visibility

As a single supplier is responsible for the entire process from ordering to delivering, there's more visibility of the entire operation and procedures, such as detecting potential bugs and tracking orders. Improved channel visibility provides you with valuable feedback and input on the effectiveness of different departments. Analyzing this information can help you optimize processes and improve productivity.

Cost savings

The goal of every business is to maximize profit, and adopting a single vendor model can help you save production costs by removing additional delivery costs and handling charges. This model prevents payments to multiple vendors with varying pricing systems. Adopting a single vendor system allows you to offer better prices to customers by leveraging better economies of scale, which can help improve sales. The single-source model also gives you more room for flexible negotiations. For example, your supplier may offer you customized payment plans and special deals.

Lesser administrative functions

Adopting the single supplier system helps simplify the purchasing process, which reduces the related administrative work. This model also enhances human resources, as businesses train only one service provider on the peculiarities of the materials and the delivery needs. Less administrative work helps save the company's resources and time, allowing you to allocate the resources to other operations.

Better efficiency

Having a single contact point for the entire delivery operation ensures the efficiency of the operation. With multiple suppliers, you may require you to contact different providers at different points in the delivery cycle. A single supplier system ensures that parties understand their duties and responsibilities. Improved efficiency also makes it easier to identify problems and makes you better equipped to handle any problems. This model ensures consistency because your supplier becomes knowledgeable about your orders and preferences and ensures every delivery complies with the agreed standard.

Quick delivery

A single supplier model thrives when providing goods or services quickly without compromising the quality. When you work with a single supplier, you may receive some personalized or special treatment, like flexibility and availability, due to a strong relationship between both parties. The single-source model makes it easier to build and maintain a strong bond with your supplier. In contrast, it may be more time-consuming and expensive to maintain such relationships with multiple suppliers.

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Improved brand image

The single-source model helps build your brand reputation and maintain a consistent image. When you conduct your business with the outsourcing partner, it ensures high quality and a good customer experience. For example, if one call centre provider handles all your customer service activities, it ensures your customers receive a consistent brand message. Maintaining a consistent message may augment your customer service and improve your chances of success.

Using a single supplier that consistently provides quality materials or services may provide you with a competitive advantage over your competitors and improve your customer base. This model may lead to brand partnership initiatives. The partnerships may lead to mutual promotion of both brands, which may help improve profits and customer base.

Related: What Is a Differentiation Strategy? (With Benefits and Tips)

Single sourcing vs. sole sourcing

The major difference between a single-source model and a sole-source model is choice. In the single-source model, companies can compare different suppliers based on different criteria and choose the supplier best suited to the business. Conversely, there are no options in sole-sourcing because there's only one vendor that can provide the desired resources or services. Usually, businesses don't have a choice but to contract with the sole supplier even if the conditions are unfavourable.

The major benefit of the single-source model over the sole-source method is that it allows you to consider options based on your bottom line. It also allows you to negotiate suitable terms of agreement and switch suppliers if one defaults or doesn't satisfy your expectations. In contrast, the major advantage of sole sourcing is that it eliminates the strenuous process of choosing from available options. It costs money and time to contact multiple suppliers to request quotations and negotiate prices. Sole sourcing also saves administrative costs because you don't spend time discussing delivery schedules, price, and payment systems.

Examples of the single-source model

Here are some examples of how some businesses use the single-source model:

Luxury clothing brand

Here is an example of a luxury brand applying the single-source model to acquire a new fabrics supplier:

Stylus Couture is a luxury clothing store that supplies top-quality clothing and accessories to different customers. Its latest collection, titled from the city of brown roofs, requires a combination of pure silk fabric and handmade embroidery stitches. The brand's current supplier went bankrupt and is out of business, so they want a new supplier. The sourcing manager invites different fabric suppliers before choosing one consistent with the brand's production style and quality requirements. After selecting, the new supplier becomes responsible for delivering the fabric, embroidery stitches, and other materials required for production.

Corporation

Here's an example of a corporation hiring a single agency for its task:

The headquarters of XYZ Inc is a 40-floor building in the city. The building requires regular cleaning to maintain the building because of the daily activities of employees, clients, visitors, and business partners. As a result, the HR manager hires a management company to manage the building. This company cleans the building daily at the close of business, provides security, and ensures compliance with regulatory standards. This contract is an example of the single supplier model, as the management company handles all aspects of managing the building rather than employing separate companies for cleaning and security.

Telemarketing company

Here's an example of a telemarking company using the single-source model to offer health insurance to employees:

GLT Connect, a medium-sized telemarketing agency with a staff strength of 160 employees, seeks an insurance provider to give its employees affordable coverage. As the number of employees is relatively small, the company uses the single-source model to hire one insurance company. The HR manager compares the packages of five insurance companies before selecting one with affordable benefits and comprehensive coverage. This insurance company provides its coverage to individual employees and the business.

Organic restaurant

Here's how a restaurant that uses organic ingredients applies the single supplier system:

GreeenBites, a small healthy-eating vegan restaurant, has a plant-based cuisine from 100% organic plants. The eatery has a policy of working with local farmers that use organic fertilizers and biological methods to control weeds and pests. To save costs and ensure top-quality products, the management team contracts with a single farmer as its supplier. The team reviews their three current suppliers based on the necessary criteria and chooses the farmer that provides the best quality products and financial benefits.

Technology company

Here's how a company in the technology industry may use the single-source model:

DateTech, an IT company, is developing new technology that they haven't released to the public. The novelty of the product makes it unique and all related information confidential. The developers decide to use the single-source model for their custom-made microprocessors to protect the innovation. The head developer evaluates different suppliers and selects one that agrees to sign a confidentiality agreement as part of the employment contract.

Pharmaceutical company

Here's an example of a pharmaceutical company using a single supplier:

Almac, a new-age pharmaceutical company, is developing a vaccine that may stop the spread of a deadly virus. The vaccine is at the clinical trials stage. The management team of Almac decides to contract with a medical research facility to monitor how vaccine affects the trial volunteers properly. Contracting with a research facility instead of getting different volunteers is an example of single sourcing.

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