A disadvantage of the few suppliers sourcing strategy is
Options:
A. the risk of not being ready for technological change.
B. the lack of cost savings for customers and suppliers.
C. possible violations of the Sherman Antitrust Act.
D. the high cost of changing partners.
E. the suppliers are less likely to understand the broad objectives of the procuring firm and the end customer.
The Correct Answer Is:
- D. the high cost of changing partners.
The correct answer is D. The high cost of changing partners.
The few suppliers sourcing strategy, often referred to as single or dual sourcing, involves a company relying on a limited number of suppliers for its procurement needs.
While this approach has its advantages, such as building strong relationships with suppliers and potentially obtaining favorable terms, it also comes with some significant disadvantages.
Let’s delve into each option to understand why D is the correct answer and why the other options are not correct.
A. the risk of not being ready for technological change.
This statement refers to the risk of technological obsolescence. When a company relies on only a few suppliers, it may limit its exposure to emerging technologies and innovations.
This can indeed be a disadvantage, but it is not the most directly related drawback of the few suppliers sourcing strategy. The primary disadvantage addressed in the question is related to the cost of changing partners.
B. the lack of cost savings for customers and suppliers.
This statement suggests that the few suppliers sourcing strategy may not lead to cost savings for both the customers and suppliers. While this can be a concern, it’s not the primary disadvantage mentioned in the question.
The key disadvantage discussed is the high cost associated with changing partners, which is related to the strategic decision to have few suppliers.
C. possible violations of the Sherman Antitrust Act.
The Sherman Antitrust Act is a U.S. federal law aimed at promoting fair competition. While it is essential to ensure that businesses do not engage in anti-competitive practices, this option is not a direct disadvantage of the few suppliers sourcing strategy itself.
Violations of antitrust laws can occur in various sourcing strategies, not just in the context of relying on a few suppliers.
D. the high cost of changing partners.
This is the correct answer. One of the significant disadvantages of the few suppliers sourcing strategy is that it can be expensive and challenging to change partners once a company has established relationships with a limited number of suppliers.
This is primarily because of the investments made in building relationships, customizing processes, and ensuring the quality and consistency of supplies.
Changing partners can involve costly reconfiguration of processes, retraining of personnel, and potential disruptions in the supply chain. Therefore, this option directly addresses a critical drawback of the few suppliers sourcing strategy.
E. the suppliers are less likely to understand the broad objectives of the procuring firm and the end customer.
This statement highlights another potential disadvantage of relying on few suppliers. When a company has a limited number of suppliers, those suppliers may have a narrower view of the company’s objectives and may not fully understand the broader goals and needs of both the procuring firm and the end customer.
While this is a valid concern, it is not the primary disadvantage mentioned in the question.
In summary, the correct answer is D because it directly addresses the high cost and challenges associated with changing partners in the few suppliers sourcing strategy.
While the other options represent potential drawbacks of this strategy, they do not capture the central disadvantage highlighted in the question.
It’s essential for businesses to carefully weigh the pros and cons of the few suppliers sourcing strategy and consider how it aligns with their specific needs and goals.
MBA,BBA.
I am Smirti Bam, an enthusiastic edu blogger with a passion for sharing insights into the dynamic world of business and management through this website.
I hold a MBA degree from Presidential Business School, Kathmandu, and a BBA degree with a specialization in Finance from Apex College,
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