What is Multiple Sourcing in Supply Chain?

“Who’s on First?” Managing Multi-Source Environments

“Don’t put all of your eggs in one basket,” says the familiar proverb of Spanish or Italian origin. The meaning is simple: relying too much on a single resource exposes you to unnecessary risk. This wisdom is especially relevant in supply chain management, where dependency on a single supplier can jeopardize resilience, service levels, and profitability.

One proven way to mitigate risk is through multiple sourcing in supply chain management qualifying and leveraging more than one supplier for the same commodity, category, or product. In this third installment of our sourcing and procurement series, we explore how organizations can effectively manage multiple sourcing strategies in SAP using tools like quota arrangements.

What is Multiple Sourcing in Supply Chain?

In supply chain management, multiple sourcing is the practice of working with multiple suppliers for the same product or material instead of relying on a single vendor. By diversifying the supply base, businesses can:

• Protect themselves against disruptions such as supplier failure or raw material shortages.
• Improve negotiating power by comparing supplier performance and costs.
• Enhance resilience by spreading procurement volume across multiple qualified partners.
• Increase flexibility when onboarding new suppliers or phasing out existing ones.

Within SAP, multiple sourcing becomes more structured and manageable. Tools like quota arrangements enable organizations to balance supplier allocations strategically while ensuring procurement aligns with broader business goals.

Why Multiple Sourcing Matters

Supply base management carries a critical responsibility: delivering the right goods, at the right time, to the right place, in the right quality, and at the best cost advantage. Relying on a single source introduces vulnerabilities, while multiple sourcing in supply chain operations strengthens resilience.

However, managing multiple suppliers quickly becomes complex. Offline methods like spreadsheets often lead to errors, misalignment, or missed opportunities. SAP helps overcome these challenges by embedding sourcing strategies directly into system-driven processes, turning complexity into a competitive advantage.

Managing Multiple Sourcing in SAP with Quota Arrangements

When Material Requirements Planning (MRP) runs in a multi-source environment, rules determine how procurement proposals are assigned to suppliers. One of the most effective tools to manage this is quota arrangements.

Quota arrangements allow businesses to:

• Define allocation percentages across multiple suppliers.
• Prioritize preferred sources while still engaging secondary ones.
• Apply rules for rounding, minimum/maximum quantities, or resets.
• Ensure supplier commitments are honored over time.

Instead of manually splitting volumes, SAP automates this process, ensuring sourcing decisions follow strategic guidelines. Quota arrangements also enable businesses to:

• Split volume between internal sources of supply (such as stock transfers).
• Onboard new suppliers gradually.
• Phase out existing suppliers while protecting service levels.
• Exhaust inventory from specific locations.

The result? Less manual effort, fewer errors, and sourcing strategies that are consistently executed.

Unlocking the Benefits of Multiple Sourcing

With quota arrangements in place, companies can monitor actual versus forecasted procurement, proactively address variances, and strengthen supplier relationships. The benefits of multiple sourcing in supply chain management include:

• Reduced risk from supplier disruption.
• Improved supplier performance through competitive allocation.
• Cost advantages from strategic splits and negotiations.
• Greater agility when responding to demand shifts or shortages.
• Alignment with strategy, ensuring procurement follows business objectives.

By leveraging SAP, businesses can simplify what was once seen as too complex to manage and transform multiple sourcing into a true advantage.

Let SAP Track “Who’s on First?”

If you’ve been avoiding multiple sourcing strategies due to maintenance challenges, know that it doesn’t have to be the case. SAP offers robust tools like quota arrangements to simplify execution and ensure sourcing strategies align with business needs.

Want to learn more about applying multiple sourcing in supply chain management? Download our white paper on reducing purchasing spend by 10–15% while improving material availability.