In the weeks since the earthquake in Japan, JIT has received more press than it has in the last 10 years (perhaps even since 9/11, when critics thoroughly impugned JIT). The strategy commonly known as dual sourcing or multiple sourcing gets held up as one way to minimize the impact of supply chain disruptions; if one supplier is unable to deliver, you can get what you need from the other, and along the way compare prices and maybe pit the two suppliers against each other to get a better price.
Don’t Put All Your Eggs in One Basket
Folk wisdom tells us not to put all our eggs in one supplier’s basket, but there is another, more advantageous approach than dual sourcing each part. It springs from the collaborative mentality of forming sound supplier partnerships for long-term competitive advantage. We call it dual sourcing the technology.
Simply put, dual sourcing the technology means that while each part comes from a single supplier, a similar part comes from a different supplier. This way, if one supplier were to fail, you could quickly switch production of that part to another supplier.
Why it Works
For example, if you have two aluminum extrusion parts one could be sourced from supplier ‘A’ and the other could be sourced from supplier ‘B’. Both suppliers are now pre-qualified and relationships including billing are set up with both. Switching between the two becomes much easier and quick.
Dual sourcing the technology mitigates risk, still limits the number of suppliers, and allows the company to reap cost advantages brought about by sharing forecasts with suppliers and keeping them involved in the design process.
For more on the advantages of supplier partnerships, please take a look at my Executive Briefing on the topic, or a case study on how one company set up a supplier partner program.
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