What Is Single Sourcing?

Definition

Single sourcing is the deliberate choice to purchase a requirement from one supplier even though other potential sources exist. It differs from sole sourcing, where only one supplier can meet the requirement at the relevant time.

For VPP, the central question is whether concentrating the business creates enough value to justify the dependence and required safeguards. The answer should be established for a defined requirement, not assumed across an entire supplier relationship.

Single, sole, dual, and multiple sourcing

These terms describe different supply arrangements rather than interchangeable labels. Use them consistently when discussing supply exposure with executives and operating teams.

For example, choosing one of three qualified suppliers is a single-sourcing decision. If a proprietary specification can only be supplied by its rights holder, the immediate constraint is sole-source availability.

How to evaluate the decision

Single sourcing may be chosen to concentrate volume, simplify operations, deepen supplier collaboration, or support supplier investment. VPP recommends evaluating those objectives alongside a documented continuity plan.

• Economics: What cost or performance advantage depends on concentrating the award?
• Alternatives: Which other sources are technically and commercially viable, and how long would they take to activate?
• Dependencies: Which sites, tools, materials, subcontractors, or transport routes could interrupt the arrangement?
• Recovery: What must happen to restore supply, and who owns each action?
• Protection: Which inventory, tooling, contractual, or capacity measures are justified?
• Review triggers: Which changes should prompt reconsideration of the strategy?

Do not equate a supplier list with an executable contingency plan. VPP recommends testing the alternative against the same qualification and readiness requirements used for an initial award.

Example: What does a second source actually buy?

Assume a hypothetical annual requirement has an all-in recurring cost of $600,000 under a single-source proposal and $630,000 under a dual-source proposal. Under otherwise comparable assumptions, the recurring premium for the second arrangement is $30,000.

That premium is the beginning of the decision, not the conclusion. In this example, VPP would examine whether the second supplier uses a genuinely independent production location and upstream source, has usable capacity, and can meet the required activation time.

If both proposed suppliers depend on the same constrained sub-tier material, adding the second company would not eliminate that shared dependency in the scenario. A different material source or another mitigation would need separate evaluation.

Any one-time qualification or tooling cost would also need to be added to the comparison. No financial value for “risk reduction” should be claimed from this example without defensible assumptions about the exposure and the actual mitigation.

Frequently asked questions

• Is single sourcing always a poor decision? No; it is a deliberate sourcing choice that can support commercial and relationship objectives. VPP recommends making its economic rationale, dependency exposure, and recovery conditions visible.
• Does dual sourcing eliminate supply risk? VPP would not treat supplier count alone as proof of resilience. Test the independence, available capacity, and readiness of the proposed alternatives.
• How often should the arrangement be reviewed? VPP recommends setting a review cadence appropriate to the category and additional triggers for material changes. Examples include a site move, major demand increase, ownership change, or deterioration in performance.

Make concentration a managed decision

VPP evaluates supplier economics alongside qualification, continuity, and execution requirements. Start by defining the supply exposure and the evidence needed to justify the sourcing choice.