Question

Identify the advantages and disadvantages of using the few suppliers approach.

Answer 1

Answer:- The main advantages of using few supplier approach are stated as below:-

1. Best Practice Shared: By having only few suppliers, the best practices can be shared between the suppliers and producers. What is the requirements of the firm can be understood quite effectively by the members of the supply chain. The suppliers can have a better understanding of what goods will be required and how these goods will be used in the production thus a better quality of raw material can be provided by them.
2. Fewer defects: By having few suppliers, a close monitoring of quality can be ensured which will result in lesser defects in the raw material orders. The goods which are poor quality will be eliminated which in turn will reduce the glitches in the supply chain.
3. Better communication: By having lesser number of suppliers a better communication can be established with the suppliers. In order to have the desired quality of raw material, a better and efficient communication is must .
4. Suppliers get to have a voice: The collaborative approach requires communication to be two way, with suppliers being able to report any problems to the customer and hopefully they can then work together to ensure that these are eliminated. A two way communication can be established in case of fewer supplier which is quite essential so that any problem can be brought to the notice of the manufacturer by the supplier and both supplier and the manufacturers can try to find the solution of the issue.
5. Continuity of supply: As only few suppliers will be supplying the material thus the suppliers can plan effectively for the future supplies.
6. Improved stability: Stability on the supply chain is very essential. With the help of stability in the supply chain , a better ratio of stock out can be achieved, any sudden variation in the demand can be met as suppliers will provide the raw material on time.
7. Flexibility: By having a close collaboration with the suppliers, a higher flexibility can be obtained in order to meet any unexpected increase in the demand, This is possible only when the firm has a limited number of suppliers.
8. Reduction in costs: Collaboration can be a good driver for cost reduction. As in the case of fewer supplier, the quality can be ensured and thus the cost associated with

Disadvantages of fewer suppliers:-

1. Suppliers can take the advantage of this approach by increasing the price of the material.
2. As some valuable inside information is provided to the suppliers, thus firms can be prone to losing their important information. These vital information can be passed to the competitors.
3. In some cases, the suppliers may not be having the capacity of meeting the future demand of the raw material which could result in hampering the fulfillment of production schedules and will result in loss of sales.
4. In case the supplier is not able to fulfill the supply of a material, it can result in standstill production of the firm.