What is a key disadvantage of single-sourcing?

A key disadvantage of single-sourcing is greater dependency on the supplier. When a company chooses to rely exclusively on one supplier for certain goods or materials, it puts itself in a vulnerable position. If that supplier encounters issues—such as production delays, financial instability, or problems with quality—the buying company may face significant disruptions in its operations. This dependency means that the buyer has limited alternatives or fallback options, making it difficult to pivot quickly if circumstances change.

In contrast, having multiple suppliers can enhance flexibility and resilience in the supply chain, as companies can switch sources when necessary, mitigating the risk associated with relying on a single entity. Thus, while single-sourcing may simplify logistics or reduce costs in the short term, the heightened risk associated with dependency can lead to greater long-term challenges.