Sole sourcing occurs where there is only one supplier available for the required product or service that your organisation needs. This means there are no alternative suppliers that can meet the specific requirement.
Understanding Sole Sourcing
This procurement method is distinctly different from situations where an organisation might choose to use only one supplier from a competitive market (often called single sourcing). In sole sourcing, the market itself dictates that only one supplier exists.
Key Characteristics of Sole Sourcing
Based on the definition, sole sourcing is characterized by:
- Exclusive Availability: There is only one supplier in the entire market capable of providing the specific product or service required.
- Unique Need: The product or service needed by the organisation is so specialized or proprietary that only one source can provide it.
- Lack of Alternatives: No other company or individual can substitute the offering of the sole supplier.
Also Known As...
Sole sourcing is also sometimes referred to as a monopolistic supplier situation, highlighting the supplier's unique position in the market.
Why Sole Sourcing Occurs
Sole sourcing doesn't happen by choice but because of the market reality. It occurs when the supplier holds a unique position, often due to:
- Proprietary Technology or Intellectual Property: The supplier owns patents or unique processes necessary for the product or service.
- Exclusive Rights: The supplier has exclusive distribution or production rights for a specific item.
- Unique Expertise or Skills: The required service demands highly specialized skills or knowledge possessed by only one entity.
- Compatibility Requirements: The new product or service must be seamlessly compatible with existing infrastructure or systems available only from one supplier.
While often unavoidable, organisations typically prefer competitive bidding or multiple sourcing to ensure better value, manage risk, and foster innovation. Sole sourcing limits these opportunities and requires careful justification and management.
