Dual Sourcing - FreeQuality.ppt

Dual Sourcing Marriott School of Management By Chad Jensen Overview What is Dual Sourcing (DS)? Types of sourcing How it works Advantages of DS Disadvantages of DS Overview When to use DS Evaluation Criteria for DS Real life examples Dual sourcing exercises Summary Recommended readings Dual SourcingDefinition Using two sources (suppliers) when purchasing a product or service. IllustrationDual sourcing Types of sourcing Single Dual Multiple IllustrationSingle sourcing Illustrationmultiple sourcing How do you Dual Source? Choose an additional supplier based on evaluation criteria. Split production between two companies Product Allocation 50/50 split Primary secondary suppliers Who should use Dual Sourcing? Any company with a need! Advantages Primary Advantage: Minimizing risk Advantages Competition between two suppliers Advantages Reliability Complex technologies Quality of products Advantages New products, especially technological products Disadvantages Scale Economies Disadvantages Higher Costs Disadvantages Research Development Disadvantages Contract Bid Collusion When should you dual source? When disruption from a sole supplier can cause business failure. When should you dual source? When it is easy and costs are low to switch sources. When should you dual source? For complex technology, and new products. When should you dual source? When one supplier cannot produce the amount of product required. Real Example “A supply chain mishap threatened to spark a United States public-health disaster of gigantic proportions. Contamination at an overseas supplier held up 48 million flu shots — half of the nations expected supply — and speculation briefly ran rampant. Would the flu season be as bad as last years? How many people would get sick? How many would die? Would this alter the outcome of the presidential election?” Real Example “March, 2000: A lightning bolt struck a power line in New Mexico…The strike ca