Strategic Sourcing: How to Choose Between Insourcing, Outsourcing, and Dual Sourcing

Strategic sourcing leads to a key decision making which ha long lasting implications. It influences the cost, quality and delivery of a product throughout the  life cycle. It's a critical decision which an organization has to take considering commercial, technical and safety associated with the product.

The most appropriate option should be selected based on a clear value proposition for insourcing, outsourcing, or dual sourcing. A detailed data analysis, supported by cross-functional collaboration, is required to objectively compare all sourcing options to avoid adverse surprises in the future.

Relevant manufacturing industry experience and commercial acumen are critical in creating the value propositions by gathering the required qualitative and quantitative data and then transforming it to measurable and business related decision making attributes.

Contact us to leverage our 10 plus years of expertise in evaluating sourcing options for manufacturing and strategic sourcing of hardware commodities.

Bad sourcing decisions lead to financial loss in terms of cost of poor quality, delivery and NRE (non recurring engineering) cost, which impacts customer satisfaction, brand name and leads to business loss in a longer run.

In general, sourcing team leads this decision making process in collaboration with engineering, manufacturing, commercial, testing and quality team. In most of the organizations, BRB (Business review board) takes the decision based on the artifacts.  In the absence of the data and comprehensive study to compare scenarios for the sourcing options, it either delays the decision making process or leads to consequences of a bad sourcing decision.

General guidelines and comparison of various sourcing options summarised below.

• Strategic Items (High Impact / High Risk):
  Insourcing or Dual Sourcing to protect IP, ensure control, and manage risk

• Leverage Items (High Impact / Low Risk):
  Outsourcing to exploit competitive supply markets and cost leverage

• Bottleneck Items (Low Impact / High Risk):
  Dual Sourcing or Selective Insourcing to secure continuity

• Non-Critical Items (Low Impact / Low Risk):
  Outsourcing for efficiency and low management effort

Contact us to leverage our 15 plus years of expertise in evaluating sourcing options for manufacturing and strategic sourcing of hardware commodities.