Risk-mitigated sourcing
Inside the Manufacturer That Eliminated Dependency Risk by Pivoting to Multi-Sourcing
Published on Dec 3, 2025
Background
A mid-market precision components manufacturer (“Firm A”) supplied critical assemblies to three global OEMs in automotive and heavy machinery. For years, procurement operated on a single-sourcing model — relying on one supplier per key raw material.
The model had seemed efficient — strong relationships, good pricing, predictable logistics. Until it broke.
The Problem
In Q2 of FY2023, one of Firm A’s largest suppliers experienced a production shutdown due to regulatory non-compliance unrelated to Firm A. The effect was immediate:
- Production stalled for 23 days
- On-time delivery rate dropped from 96% to 51%
- Two OEMs issued “at-risk vendor” notices
- Emergency spot procurement raised material cost by 31%
- Reputation damage was immediate, recovery slow
The crisis wasn’t about material cost — it was procurement concentration risk.
Root-Cause Diagnosis
An internal review uncovered three structural flaws:
| Issue | Impact |
|---|---|
| 1. Single-sourcing for 71% of procurement spend | Over-dependence, no fallback |
| 2. Contracts focused on price, not continuity | Weak SLAs on supply assurance |
| 3. No risk heat map or resilience metrics | Blind spots in supplier monitoring |
Procurement was treated as cost optimization, not business risk management.
Strategic Fix — Multi-Sourcing With Risk-Weighted Procurement
The company redesigned procurement around one mission: ensure continuity before cost.
The new model:
- Minimum two approved suppliers per critical material
- Quarterly risk scoring (financial, operational, geopolitical)
- SLA shift from “price & volume” to “price + volume + continuity”
- Supplier performance dashboards integrated with production scheduling
- Dual-region sourcing for high exposure items (India + SE Asia)
Instead of buying cheapest — Firm A began buying safest.
Execution — 5 Months
| Phase | Focus | Outcome |
|---|---|---|
| Month 1 | Risk exposure study | Identified 9 high-exposure SKUs |
| Month 2 | Supplier scouting & qualification | 14 new suppliers shortlisted |
| Month 3 | Trial orders & audit | 9 approved suppliers onboarded |
| Month 4 | Contract restructuring | Supply assurance SLAs added |
| Month 5 | Supply chain integration | Scheduling + procurement synched |
Procurement became a risk function, not just a purchasing function.
Results (Measured 12 Months After Change)
| KPI | Before | After | Change |
|---|---|---|---|
| Exposure to single-sourcing | 71% | 14% | –57pp |
| Production interruptions | Avg 6.2 days / quarter | 0.8 days / quarter | –87% |
| Emergency procurement cost | ₹8.4 crore / year | ₹0.9 crore / year | –89% |
| On-time delivery | 89% | 97% | +8pp |
| Supplier negotiation leverage | Weak | Strong | Signed 3 long-term contracts on better terms |
OEMs not only retained Firm A — they increased the vendor score.
Lessons & Takeaways
- Cost efficiency without resilience is a hidden liability
- Procurement should be evaluated on risk as much as on rate
- Vendor diversification is cheaper than emergency procurement
- In modern industrial supply chains, continuity IS value
The company didn’t succeed by spending less — it succeeded by de-risking more.
*We take our clients' confidentiality seriously. While we 've changed their names, the results are real.
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