As a small business owner you must know how to maximise your resources. When you make a supply chain strategy, you might be considering multi sourcing inventory. This is a tried and tested approach that many big and small businesses use. However, just because it works for them it does not mean it will be effective for your small business. You need to know the pros and cons of multi sourcing before you make a decision.

 

Here are the advantages and disadvantages of implementing multi sourcing strategy.

 

Advantages of Multi Sourcing

  1. Multi sourcing provides you with many suppliers to get materials and inventory from. If one supplier becomes bankrupt or does not have the stock you want, you can always purchase from another.
  2. Your small business is more flexible when it comes to purchases and stock even when your customer demand is high. Multiple suppliers reduce the risk of understocking.
  3. You can meet customer demand even during peak seasons. This allows you to purchase inventory from another supplier when one does not have the stock you need. This enables you to maintain sales during holidays.
  4. You have leverage when it comes to negotiating better payment terms. Multiple suppliers want your business. You have a higher chance of getting a better deal when suppliers compete with each other.
  5. Many suppliers want you to become a loyal customer. They want to improve their competitive advantage by providing good value prices and better services. You can leverage this to maximise resources.

 

Disadvantages of Multi Sourcing

  1. Sharing information is important along the supply chain. When you have more than one supplier, communicating with each other is more complex. Miscommunication can happen often which may lead to delays, non-compliance and miscues. These create costly problems for your small business.
  2. The lower number of purchased inventory reduces your bargaining power to get a better deal. You are unlikely to get a lower price from a supplier because they know they are just one of many business partners.
  3. You will spend more for implementing regulations, managing inventory and purchases, and re-negotiations of contracts. This will consume your resources and may overtax your employees.
  4. Costs will rise because of smaller orders across different suppliers. Your profit margin may shrink and reduce your growth opportunities.

 

When you plan a supply chain strategy, you have to consider both advantages and disadvantages of multi sourcing. Once you weigh all the information, you can budget the costs and resources you have to maximise your funds. Your small business needs flexibility so that you can adjust to changes in your niche. This provides you with options for growth and a competitive advantage. You still need to grow your company despite any challenges or risks you might encounter. You also have the option to use one supplier, if you think it is the most beneficial choice.

 

We at Robookkeeper can provide you with affordable small business accounting services. We have a team of experienced outsourced bookkeepers that can do your bookkeeping tasks. We qualify them first before we send them your accounting books. This ensures service quality and delivery. You can reach us by email through [email protected].