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Which of the following is not an advantage of the "few suppliers" sourcing strategy?

Which of the following is not an advantage of the “few suppliers” sourcing strategy?

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Which of the following is not an advantage of the “few suppliers” sourcing strategy?

 Options:

A. suppliers have a learning curve that yields lower transaction and production costs
B. suppliers are more likely to understand the broad objectives of the end customer.
C. less vulnerable trade secrets.
D. creation of value by allowing suppliers to have economies of scale.
E. suppliers’ willingness to provide technological expertise

The Correct Answer Is:

C. less vulnerable trade secrets.

Let’s start by delving into why option C, “less vulnerable trade secrets,” is not an advantage of the “few suppliers” sourcing strategy.

Correct Answer Explanation: C. Less Vulnerable Trade Secrets:

The “few suppliers” sourcing strategy involves concentrating procurement from a limited number of suppliers. Contrary to the statement, this strategy doesn’t necessarily make trade secrets less vulnerable.

In fact, having fewer suppliers can potentially increase the risk of trade secret exposure or compromise. With a limited pool of suppliers, there’s a higher chance that these suppliers might have exposure to similar technologies or methods, making it easier for trade secrets to be leaked, intentionally or unintentionally.

Moreover, if one of the few suppliers breaches confidentiality, the impact could be substantial as there are fewer alternatives to mitigate the risk or continue operations seamlessly.

Why the Other Options are not Correct?

Now, let’s explore why the other options are considered advantages of the “few suppliers” sourcing strategy:

A. Suppliers have a learning curve that yields lower transaction and production costs:

When working closely with a limited number of suppliers, there’s an opportunity for both parties to understand each other’s processes better. This understanding leads to streamlined communication, efficient workflows, and a reduction in transaction costs.

Over time, suppliers become more adept at meeting the buyer’s specific requirements, leading to lower production costs due to improved efficiency and fewer errors.

B. Suppliers are more likely to understand the broad objectives of the end customer:

A close relationship between a buyer and a limited number of suppliers fosters a deeper understanding of the buyer’s needs and objectives.

With ongoing collaboration, suppliers can align their offerings more closely with the buyer’s goals and objectives, ensuring that the products or services provided are tailored to meet specific requirements.

D. Creation of value by allowing suppliers to have economies of scale:

By concentrating procurement from a select group of suppliers, buyers can provide more consistent and predictable demand. This enables suppliers to plan their production more efficiently, leading to economies of scale.

Larger production runs often result in lower per-unit costs, benefiting both the supplier and the buyer through potentially reduced prices or better quality products.

E. Suppliers’ willingness to provide technological expertise:

Establishing long-term relationships with a few suppliers encourages a collaborative environment where suppliers are more willing to share their technological expertise.

This collaboration can result in innovative solutions, improved products, or enhanced services that align closely with the buyer’s needs. Suppliers are incentivized to invest in innovation and technology, knowing they have a stable and committed customer.

In summary, while “few suppliers” sourcing strategies offer several advantages such as cost efficiencies, better alignment with customer objectives, economies of scale, and access to technological expertise, the notion that it makes trade secrets less vulnerable is not accurate.

In fact, having fewer suppliers could potentially heighten the risk of trade secret exposure or compromise due to the concentration of procurement and the interconnectedness of the supplier pool.

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