What is Direct Sourcing and its Disadvantages?

Direct sourcing occurs when an organization purchases directly from a manufacturer or supplier without involving any middlemen in its supply chain. 

It’s one of the most popular ways to buy products because it saves time and money on logistics costs, which helps improve profit margins for businesses. 

However, there are a lot of disadvantages associated with direct sourcing which not many businesses are familiar with.

Whether you are a big company spending $100K a year on production or a small firm, it is important to understand how direct sourcing can harm your business.

Read on to learn more about the disadvantages associated with this flaunted model and how Vidl Sourcing can help you overcome some of the challenges associated with this model. 

What are the disadvantages of direct sourcing?

The main disadvantage of direct sourcing in the supply chain is it’s usually a time-consuming process that can be difficult to scale up if your business starts to grow.  

Many companies who use the direct-only model have trouble with suppliers not being able to meet their demands, customer service issues and product quality issues.

They run into problems such as:

Limited product offerings

When your business is sourcing directly through one supplier, you will often only have access to products offered by that one supplier. This can be problematic if the product offering isn’t extensive or doesn’t meet your needs. And if you do find a similar item elsewhere, it may not be as high quality as the original product.

Supplier goes out of business

Even if a supplier is offering great prices, they could go out of business and leave your company without a supplier and with lost profit because you were only purchasing from them.

Product authenticity issues

When you are purchasing directly from a manufacturer or supplier, there’s no way to guarantee that the products are authentic unless the company has an authentication process in place.

Difficult customer service

There can be language barriers and logistical hurdles between buyer and seller while involving direct sourcing in the supply chain which makes it harder for customers to give feedback or make returns. You may also have trouble finding out who you should contact if something goes wrong with your order because there’s usually not much information available on the manufacturer/supplier.

Undesirable lead times

If you need your products delivered quickly, sourcing directly through one supplier can be problematic because there may not be enough inventory available to meet demand. If this is the case, it will completely change your order fulfillment strategy and require changes in production systems, product distribution or warehouse storage facilities.

Why should you work with a sourcing company?

A sourcing company can help eliminate some of the disadvantages associated with direct sourcing by working as an extension of your business.

As a third party, they take care of the logistics and other hardships that come along with direct sourcing while you focus on developing your core competencies and growing your business.

Here’s what you should expect from partnering with a sourcing company:

Speed

A third-party supplier will be able to meet tight deadlines because they work with several manufacturers and suppliers who offer many options in terms of volume, colors and styles to reduce order-to-delivery turnaround time for their customers. If you’re used to waiting weeks or months for products, this will help save you money since fewer resources will be tied up during the time.

Discounts

Working with a third-party supplier can help you take advantage of special discounts and promotions from factories to reduce your costs even further. For example, they may be able to negotiate lower prices for bulk orders or exclusive products that are not available anywhere else.

Scalability

Since a sourcing company is an extension of your business, it will help you scale up more easily because there’s usually a production-ready pool of suppliers available. This is better than being involved with direct sourcing in procurement as you won’t have to find new suppliers each time you need more inventory. In addition, the company itself has extensive experience in scaling up for large enterprises which can make the process go more smoothly for everyone involved.

Inventory Management

Third-party suppliers handle logistics and provide feedback about how much inventory is available at a given time. This helps you make better decisions about when to place orders and will reduce the risk of overbuying from your suppliers.

Organizational Support

An experienced sourcing company has built an extensive network of suppliers and experience by working with large enterprises - meaning they have the tools to make your supply chain management easier. For example, they may be able to provide additional advice on how best to package particular products or handle storage for bulk orders so you don't need as much warehouse space.

Why Vidl Sourcing is best suited for all your sourcing requirements?

With a combined experience of 20 years,  the team at Vidl Sourcing has worked with many companies in more than dozens niches that are looking to source products for both online and retail sales, making us one of the leading companies in the industry.

Our professionalism will be evident from the moment you speak with one of our sourcing consultants until after your order has been delivered.

We offer free consultations which allow you to explain your business model, sales channels, lead times and other requirements so we can ensure you get exactly what you need.

If there are any issues or problems along the way, we listen intently then provide guidance on how best to resolve them quickly in order to minimize delays or costly mistakes. 

Through our experience partnering with enterprises across North America and Europe , we’ve established strong relationships with product manufacturers all around the world.

Vidl Sourcing is your go to place!

So there you have it, a quick rundown of the disadvantages of direct sourcing and why Vidl Sourcing should be your go to partner for all sourcing requirements.

We hope this article has been interesting and informative and you are now thoroughly familiar with the disadvantages associated with direct sourcing in retail or any other type. 

If you need help with any of the topics we discussed or would like more information on how our company can assist in sourcing needs please get in touch!