“I don’t know how they’ll do it…we couldn’t! But somehow I know they will.”
John, Operations Director of a major agrochemical company, was looking at a flat, bare space on a chemical site near Compiégne. Four weeks previously the French company’s senior director, Christian, had said they could deliver a lactone specialty-chemical from a new, dedicated (but yet to be built) plant; and deliver tankers inside 18 months.
“But how do we calculate a price to cover the construction?” Christian mused in that early meeting.
“Open book!!” he expostulated when he heard the tentative answer. “We’ve never done that. I don’t even know how it works. Mais, vous savez quoi, I’m willing to try it if you are.”
It was a different story with the next product, a pyridine, on the Rhine and, unlike the lactone, this was already commercially available. But the customer’s requirement was equivalent to twice the capacity of any of the three suppliers in Germany, Switzerland and Japan.
“Why don’t you spread your requirements across the three”, ventured the German company’s CEO?”
“Because we want to buy from a known plant that matches our needs, and not have to play scheduling games” he was told. “It needs a dedicated plant and if you won’t build it, we’ll find someone who will.”
The German CEO’s efforts to share the business with competitors aroused suspicion - enough for the customer to commission supply market research which reported that this potential German supplier controlled the market for a malonate precursor and sold it to the Swiss and Japanese firms. The CEO had thought he could avoid capital investment in the pyridine product for a single customer, whilst reinforcing his dominance in the market for the malonate precursor. A threat to source all requirements from another company would drive the chosen supplier to invest in the precursor and thus destroy the German company’s hegemony. In order to retain their monopoly, the German CEO quickly agreed.
That was two out of three intermediates needed for a new blockbuster agrochemical which already had a planned launch date, and a plant for the final product under construction.
It was a different story again for the third product, a phenol compound. The prospective English supplier professed great confidence in its ability to manufacture and supply. They had not made or sold the product previously - nobody had - but they had the raw materials and claimed to have good technology. George, the MD, and his team however would share nothing about how they were going to do it. They refused to explain their process or give any information about development progress. With time passing, the plug was pulled and the business was given to a competent French supplier.
Three very different scenarios in terms of technology, market and business culture. At no point, for any of these products, was a multi-supplier strategy considered and the point of these concurrent stories is this.
Full commitment from business partners was needed.
Suppliers had to be open and transparent within reason; or they were dropped.
In operation, there would be full synchronisation of manufacture and delivery.
Only one supplier can be the ‘best’. Adding a second means less than best.
A no-brainer, surely! Who, with any choice whatsoever, would consider a multi-supplier strategy?
The examples are compelling, but they conflate exceptional, project-specific conditions with a general sourcing rule. Single-supplier strategies can indeed unlock speed, commitment and investment when volumes are extreme, technology is immature, switching costs are prohibitive, and the customer holds enough leverage to underwrite supplier risk. That does not make them universally superior.
Multi-supplier strategies are not about accepting “less than best”; they are about managing systemic risk, information asymmetry and long-term bargaining power. They are often optimal where demand volatility, geopolitical exposure, operational resilience, innovation optionality, or cost discipline matter more than maximal short-term alignment. History is replete with single-supplier models that looked “no-brainer” until a plant fire, regulatory intervention, quality failure or financial distress revealed the fragility of total dependency.
In short, “only one supplier can be best” is true only in a narrow, time-bound sense. In many real markets, the best strategy is not choosing the best supplier, but designing the best portfolio.