Questions
Stay, dual-source, or switch?
Change suppliers when the new source beats the current one on full landed cost and on reliability, after you count the cost of qualifying it and the risk of the changeover. When the saving is real but the new source is unproven, the wiser path is usually to dual-source first and move volume as the newcomer earns it.
Compare landed cost, not quotes
A unit price is only where the cost begins. Add freight, duties, packaging, payment terms, and the money tied up in extra stock when lead times are longer. A supplier ninety days away forces you to hold more safety stock than one thirty days away, and that stock is cash sitting on a shelf.
Then add what a quote never shows: the defect rate on a real production run, the on-time record, how the supplier behaves when an order changes, and the one-off cost of trial lots, inspections, and approvals. A sample made with care for a sales visit says little about the ten-thousandth unit.
A worked example
A kitchenware brand buys 20,000 units a year at $8.40 from a supplier with a 30-day lead time and a 1.5 percent defect rate. A new supplier quotes $7.20 with a 75-day lead time, and freight and duty add $0.55 a unit over the current route, so the net saving is $0.65 a unit, or $13,000 a year.
The extra 45 days of lead time means holding about 2,500 more units, roughly $17,750 of stock, which costs about $3,550 a year at a 20 percent carrying rate. Qualification takes two trial lots and a visit, about $12,000 once. If quality matches, the switch pays back in about fifteen months.
If the new defect rate proves to be 4 percent, the extra 500 faulty units a year cost about $6,100 to replace and handle, and payback stretches past three and a half years. Moving 30 percent of volume for two quarters would reveal the true rate on 3,000 units while the current supplier carries the rest.
Why dual-sourcing is skipped
Running two suppliers is more work: two sets of specifications, two relationships, and smaller orders that may carry a higher price. That nuisance is why it rarely makes the shortlist, yet it is often the option that protects you best when one source fails.
Concentration is a risk in its own right. With one supplier, one region, or one shipping lane, a single fire, strike, or port delay can stop your sales, so weigh what a month without stock would cost before weighing what a second source costs.
How the room weighs a supplier change
Staying, switching, and dual-sourcing each get their own Champion, and the landed cost and payback sums are worked exactly from your own figures. Inspector treats a sample as partial evidence and a production run as stronger, while Scout checks public facts about the supplier and the route.
Red Teamer runs the season in which the new source misses a shipment just before your busiest month. Diplomat considers how the current supplier will respond, since a supplier that learns it is being replaced may change its priorities. The Verdict sets the defect and on-time levels that would justify a full switch, and the Human Decision rests with your team.
Questions
- Should we tell our current supplier?
- Usually yes, once qualification is under way, and in a measured tone. A supplier that hears it from the market tends to react worse, and some will improve their terms when asked plainly.
- How large should a trial order be?
- Large enough to come off the normal production line rather than a special batch. Ask for the lot sizes, packaging, and inspection you will need at full volume.
- When is a single supplier fine?
- When the part is easy to source elsewhere quickly, or when volume is too small to split. Even then, keep a second source qualified on paper so you know whom to call.
Further reading
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