Material management is one of the elements of supply chain which includes material planning, procurement of raw material and releasing a trigger to sourcing/Purchasing based on different inputs for new part requirement (MBOM, PBOM and change request).
Existing methods on Sourcing/Purchasing are namely
1) Single Sourcing
2) Multiple Sourcing
3) Multilevel Sourcing
1) Single Sourcing/Purchasing
Single Sourcing is very risky for any organization as it compels the organization to be dependent on only one company, It forces the organization to be dependent on each other and the company cannot look for alternatives in case of disruptions and demand uncertainty.
Benefits : Need to have a very strong supplier relationship and need to have a vested intersed between both parties so they can work with each other.
Demerits: it is always problematic and it gives the supplier edge and gives a monopolistic situation where the power of parity is more with supplier.
2) Multiple Sourcing/Purchasing
Multiple sourcing gives the organization to have multiple suppliers for a particular component, demand is less and supply is more.
Benefits : Organizations have many options
Demerits : Supplier relationship cannot be developed due to demand uncertainty from organizations.
3) Multilevel Sourcing/Purchasing
Multilevel Sourcing gives an organization to have a single consolidators which in turn can do contracting to many sub suppliers where volume is not much
Benefits : Less operational activities as you can contact a single supplier for multiple activities
Demerit : Less contact on sub suppliers leads to operational challenges